Report: Saudis want OPEC+ to cut more than 1 mln bpd

MOSCOW, Mar 4 (PRIME) -- Saudi Arabia is urging OPEC+ to agree to an oil-output cut of more than 1 million barrels a day to compensate for the hit to demand from the global spread of the coronavirus, Bloomberg reported on Wednesday, citing sources.

Options discussed by ministers in Vienna on Wednesday included a reduction as big as 1.5 million barrels a day, but the talks were still underway and there was no agreement yet, said delegates, who asked not to be named because the talks were private. To secure a supply curb that could support prices, the Saudis must first overcome Russian resistance.

The kingdom’s push reflects mounting concern that growth in fuel consumption could be wiped out this year as the outbreak wreaks havoc on the world economy. Following oil’s biggest weekly slump since the 2008 financial crisis, ministers from OPEC and its allies must overcome their differences to forge a deal, while also grappling with the risks of bringing together delegations from 23 nations as the deadly disease continues to spread.

Iranian Oil Minister Bijan Namdar Zanganeh, whose country is enduring a severe coronavirus outbreak, arrived in the Austrian capital on Wednesday without his usual cohort of government officials. He refused to be drawn on the possible extent of production curbs, and said Russia is likely to wait until the last moment to make any decision.

The cut under discussion in the Austrian capital is larger than that put forward by the group’s technical committee on Tuesday. The panel recommended a 600,000 to 1 million-barrel-a-day reduction in April–June, more ambitious than curbs mooted in February but still short of some estimates of the demand loss.

Equatorial Guinea’s Minister of Mines, Industry and Energy Gabriel Obiang Lima told reporters that he supports a cut at the higher end of that range.

Crude jumped as much as 2.6% in New York and traded at U.S. $48 a barrel as of 10:36 a.m. Prices slumped 16% last week, and remain too low for most OPEC+ members to balance their budgets.

Delayed Start

With flights canceled in Europe, schools closed in Japan, towns quarantined in Italy and a rising death toll from Iran to Washington state, the coronavirus crisis has gone global, and with it, its impact on energy demand. For only the fourth time in almost 40 years, oil consumption may not grow at all in 2020, according to a growing minority of traders, investors and analysts. Goldman Sachs Group Inc. on Tuesday became the first major Wall Street Bank to forecast a contraction in demand this year.

“This is a sudden, instant demand shock,” said Jim Burkhard, vice president and head of oil markets at IHS Markit Ltd. “The scale of the decline is unprecedented.”

In an effort to limit potential contagion as officials arrived in Vienna, OPEC said medical advisers would conduct screenings to detect staff or delegates who might have high temperatures. Some employees will be told to work from home. OPEC told national delegations to limit their size to the “bare minimum,” pressing ahead with the meeting even as conferences across the globe were canceled.

Amid the difficult circumstances, OPEC Secretary-General Mohammad Barkindo and Russian Energy Minister Alexander Novak sought a moment of levity, posting on Twitter a video of themselves performing a handshake with their feet, in keeping with guidelines to avoid bodily contact that could spread the virus.

OPEC has taken the unprecedented step of blocking journalists from entering its headquarters, and has also scrapped the final press conference in favor of a webinar. The cartel’s gatherings typically attract a contingent of hundreds of officials, reporters, TV crews, analysts and consultants from around the world.

The OPEC+ alliance was formed in late 2016, and has been struggling to manage the price impact from the U.S. shale boom ever since. It kicked off a new round of supply curbs at the start of this year, removing about 2.1 million barrels a day from the market.

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