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  • Deeper oil cuts won’t work – Russia tells OPEC
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Deeper oil cuts won’t work – Russia tells OPEC

Admin March 11, 2020
OPEC

This week’s oil price rout had become inevitable and cutting oil output has ceased to make sense because it is unclear how deep the impact of the coronavirus on demand will be, Russia’s deputy energy minister said in an interview with Reuters on Wednesday.

Last week, Saudi Arabia failed to secure Moscow’s support for deeper output cuts at a meeting of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+.

Following the disagreement, Saudi Arabia has threatened to flood the market with oil. Oil prices LCOc1 fell by as much as a third on Monday and fell again on Wednesday.

OPEC had proposed to deepen cuts by 1.5 million barrels per day (bpd) and Russia was asked to cut an extra 300,000 bpd.

Pavel Sorokin, Russia’s deputy energy minister, described that task, which would have doubled Moscow’s commitment to 600,000 bpd, as technically challenging.

He said there was no point in cutting until after everyone understood how sharply demand could fall.

“We cannot fight a falling demand situation when there is no clarity about where the bottom (of demand) is,” Sorokin said. He attends all joint meetings with OPEC together with his boss Alexander Novak and gave Reuters his first interview since last week’s meeting.

“It is very easy to get caught in a circle when, by cutting once, you get into an even… worse situation in say two weeks: oil prices would shortly bounce back before falling again as demand continued to fall.”

Russia had proposed extending existing OPEC+ combined cuts of 1.7 million bpd for at least one more quarter to try to assess the real impact on demand from the coronavirus, but OPEC refused. From April 1, all OPEC+ producers can now pump oil freely.

“We see the (current) market situation as predictable yet unpleasant… Market and market forces will regulate it fairly quickly,” he said, adding Russia believed oil prices would find a balance at around $45-55 per barrel.

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