OPEC gathers in Vienna to discuss further cuts in oil output

VIENNA (Reuters): OPEC ministers were starting to arrive in Vienna on Tuesday where they will debate whether to cut oil production further as the spread of the coronavirus hits demand for crude worldwide.

The Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, a group known as OPEC+, agreed in December to a collective cut in output of 1.7 million barrels per day (bpd) until the end of March.

Saudi Arabia, the world’s biggest oil exporter, has been voluntarily cutting an additional 400,000 bpd, meaning OPEC+ is effectively curbing its production by 2.1 million bpd in a bid to support oil prices.

But since then, the spread of coronavirus has weighed on economic activity worldwide and hit demand for oil.

The International Energy Agency (IEA) said in February that demand in the first quarter of 2020 was expected to fall by 435,000 bpd compared with a year earlier, which would be the first quarterly decrease since the financial 

crisis in 2009.

OPEC has been discussing cutting oil production by 1 million barrels per day (bpd) on top of the existing cuts, among other options, as it seeks to stabilise falling prices. That’s more than a cut of 600,000 bpd it initially proposed.

Talk of a bigger reduction has helped Brent crude LCOc1 and WTI CLc1 prices rebounded this week after the fell more than 20% from their 2020 peak in January on concerns about the impact of the coronavirus outbreak. 

Kuwait’s oil minister said yesterday before heading to Vienna that he was optimistic about the outcome of the meetings and continued cooperation among OPEC+ countries.

OPEC ministers will meet in Vienna on 5 March and then gather with ministers from non-OPEC countries on 6 March.

A technical committee of the alliance met yesterday to review market fundamentals while a ministerial committee will convene on Wednesday at 1130 GMT.

Russia is so far not convinced about the need for a bigger cut in production, and some sources have said OPEC members could shoulder any additional curbs themselves.

Brent crude was trading close to $ 53 a barrel yesterday, up from this year’s low of $ 48.40 hit a day earlier.