OPEC+ Fails to Reach Consensus on Cutting Oil Production, Crude Prices Fall to 2017 Lows

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by Bhushan Akolkar · 3 min read
OPEC+ Fails to Reach Consensus on Cutting Oil Production, Crude Prices Fall to 2017 Lows
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As crude prices went tumbling down, OPEC and non-OPEC members met on Friday for discussing the cutdown on oil production to control the price. However, the two groups failed to reach a consensus with Russia backing off.

The rising concerns with the coronavirus spread have put the global economy in doldrums at this stage. On Friday, the OPEC and non-OPEC allies met for discussing the cutdown on oil production amidst slowing demand.

Just like the stock markets, the global crude market has faced the brunt of the virus spread. On Friday, International benchmark Brent crude dipped 8% trading at $45.46 a barrel. From its January peak, the Brent futures also collapsed by nearly 30%. This has also got the crude prices sinking to its 2017-lows.

However, it looks like OPEC and non-OPEC allies have failed to reach a mutual consensus on the matter of cutting down oil production to inflate demand and thus the prices. Reportedly, Russia has also refused to agree to the deepest supply cuts planned after the global financial crisis.

Moscow said that it is currently not prepared to approve any further reduction in its oil production. Leaving the meeting in Vienna on Friday, Russian Energy Minister Alexander Novak that the failure to reach a consensus means members can now pump whatever they like starting April 1st.

“We have made this decision because no consensus has been found of how all the 24 countries should simultaneously react to the current situation. So as from April 1, we are starting to work without minding the quotas or reductions which were in place earlier but this does not mean that each country would not monitor and analyse market developments,” he said.

OPEC Proposal for Cutting Oil Production

Earlier on Thursday, the OPEC proposed cutting down the production by 1.5 million barrels per day. Supposedly, this was to start from March 1st and continue by the end of the year. However, this proposal would only go further subjected to approval from non-OPEC members, including Russia.

OPEC that the deal implementation will happen only on a pro-rata basis wherein OPEC members will 1 million bpd and non-OPEC members will cut half-a-million bpd. While referring to the OPEC and non-OPEC allies as OPEC+, Helima Croft, head of global commodities strategy at RBC, told CNBC:

“It is truly a go big or go home moment for this organization. If Russia says no today, there are real questions about the viability of the OPEC+ arrangement.”

Well, does it mean that Russia’s relation with OPEC could take a hit here onwards? Speaking on it, OPEC Secretary-General Mohammed Barkindo said:

“We have no reason to doubt the continued commitment of the Russian Federation to this partnership. We have repeatedly heard from the highest level of government in the Russian Federation of the commitment of the government to this partnership in the declaration of cooperation.”

As the allies failed to reach a consensus, Iranian Oil Minister Bijan Zanganeh said there no Plan B for OPEC.

Market News, News
Bhushan Akolkar
Author Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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