Oil falls to more than 2-year low as Russia balks at proposed Opec+ cuts

Headquarters of the Organization of the Petroleum Exporting Countries in Vienna. (AP pic)

SINGAPORE: Oil extended losses as Russia resisted pressure from its Opec allies to make deeper production cuts, preferring instead to wait until June to decide.

Brent fell as much as 5.9% in London to its lowest level since July 2017, extending Thursday’s slide.

Opec and its allies are meeting in Vienna Friday, following Thursday’s ministerial meeting in which the cartel agreed to a supply reduction of 1.5 million barrels a day. Russia, however, wasn’t present at that gathering and wants to maintain current output cuts until June.

Global equity markets were also falling Friday as a result of the coronavirus outbreak, while the oil market’s structure has nosedived.

Russia’s oil minister returned to Vienna on Friday for a meeting with the Organization of Petroleum Exporting Countries and allies, as the cartel engages in a high-stakes diplomatic gamble that risks a further price crash if it backfires.

Members of the group had earlier warned that a failure to join may lead to the coalition abandoning curbs altogether.

Nevertheless, Opec Secretary-General Mohammad Barkindo struck a more conciliatory tone at an informal meeting at a Vienna hotel on Thursday evening, saying there was no reason to doubt Russia’s commitment to the alliance. The meeting comes as the coronavirus outbreak threatens to shrink global crude demand for only the fourth time in almost 40 years.

“It looked like Opec were trying to corner Russia, and the Russians didn’t like it,” said UBS Group AG analyst Giovanni Staunovo.

Brent for May settlement fell US$2.30 to US$47.69 a barrel on the ICE Futures Europe exchange as of 11.25am in London.

West Texas Intermediate futures for April delivery lost US$2.01, or 4.4%, to US$43.89 a barrel on the New York Mercantile Exchange.