Coronavirus: OPEC ministers divided over making additional price cuts

Ministers from the Organization of the Petroleum Exporting Countries (OPEC) will meet in Vienna Thursday (March 5) to try to overcome their divisions on how to react to the fall in oil prices in the wake of the novel coronavirus epidemic.

The group already had to contend with abundant supply on global markets weighing on prices but the spread of COVID-19 across the world has sent them plunging.

The European benchmark of Brent sank to under 50 dollars on Sunday, a level not reached since July 2017.

The effects of the virus on global demand – particularly in worst-hit China – has blown a hole through the group’s attempt to support prices at its last meeting in December by agreeing on production cuts.

The only option for OPEC – and its allies in the OPEC+ grouping who will be joining meetings on Friday – would appear to be another round of production cuts.

The success of the summit, which has been called three months ahead of the next scheduled meeting, will above all hang on the alliance between Russia and Saudi Arabia, the world’s second and third-biggest producers and the most important players in the OPEC and OPEC+ groupings respectively.

“Their objective will be to overcome their differences of opinion so as to be able to speak with one voice from tomorrow,” said Carsten Fritsch, an analyst at Commerzbank.

The splits on the way forward even within OPEC were on display on Wednesday as delegations arrived.

The chairman of Libya’s National Oil Corporation Mustafa Sanallah said he was wary of any additional cuts.

Related news: 14 Italians who tested positive for coronavirus shifted to Gurgaon hospital

“I think there’s no need to reduce,” Sanallah told AFP, adding, “I think the price is good right now.” However, Iran’s Oil Minister Bijan Namdar Zanganeh said a cut of “at least… around half a million barrels’ was necessary to stabilise the market.

Saudi Arabia is also a supporter of further cuts, with Riyadh even thought to be amenable to a cut in the order of a million barrels per day.

But Russia may be harder to convince on this score, with Russian President Vladimir Putin being quoted on Sunday as saying the current market price was “acceptable” and above the level foreseen in Russian economic planning.

Russia’s RIA Novosti agency reported Wednesday that Moscow’s delegation was proposing an extension of the existing deal with no fresh cuts.

Aside from bridging their differences on the effect of the virus on the market, the assembled diplomats are also having to accommodate changes to their routines in Vienna.

Two medical workers were on hand to screen the temperatures of all those entering OPEC headquarters on Wednesday.

OPEC’s Secretary-General Mohammed Barkindo and Russian Energy Minister Alexander Novak were seen in a video tweeted by the organisation attempting a “foot shake”, gently bumping the sides of their feet together in a more hygienic alternative to a handshake.

The cartel has also taken the extraordinary step of barring access to its headquarters for the media due to the “risk that would come from convening such a vast number of people in one place.”

Livestreams of the beginning of meetings will instead be made available to journalists at a press centre assembled in a nearby hotel.

In a statement on Tuesday OPEC said it was following UN guidelines for such meetings and planned to “shorten the format of such gatherings, limit the number of participants and cancel any related side-events.”