By Verity Ratcliffe and Matthew Martin
The Organization of Petroleum Exporting Countries and its allies are to meet next week in Vienna to assess their global cuts policy. Energy Minister Prince Abdulaziz bin Salman is confident of OPEC’s partnership with other producers including Russia, he told reporters on Tuesday in Riyadh.
“We are communicating with each other at every opportunity,” he said, before addressing an industry conference in the Saudi capital. “The OPEC secretary-general is attending this conference, and we just had a chat. We did not run out of ideas.”
Brent crude jumped as much as 68 cents a barrel, or 1.2%, before paring gains. The benchmark contract was 16 cents higher at $56.46 a barrel at 1:13 p.m. in London. Brent has slumped 15% this year.
Global oil demand will drop this quarter for the first time in over a decade as the coronavirus batters China’s economy, creating a significant supply surplus, according to the International Energy Agency. The U.S., Japan and Hong Kong have issued travel warnings for South Korea, the worst-affected country after China, while Italy, the outbreak’s epicenter in Europe, might seek flexibility on budget targets.
“I think this is a short-term issue,” Saudi Aramco Chief Executive Officer Amin Nasser said at the same conference. “In the second half, I’m confident it will be over.”
Although the coronavirus has affected oil demand for two months, its impact on Aramco has been minimal, Nasser said. “This is not something new. We have had many blips, and we will withstand this.” OPEC, he added, “will react to the situation.”
Russia hasn’t said whether it will support deeper production cuts of 600,000 barrels a day, as proposed by a technical panel of the coalition known as OPEC+. Russia’s Energy Minister Alexander Novak is “positively engaged” with Saudi Arabia — OPEC’s biggest producer — and other suppliers, Prince Abdulaziz said.
OPEC+ members already agreed in December to withhold 1.2 million barrels a day from the market. An additional cut of 600,000 barrels would amount to more than 2% of OPEC’s January production, data compiled by Bloomberg show.
OPEC Secretary-General Mohammad Barkindo, speaking at the conference, said the world’s “thirst for energy will continue to grow,” in spite of the coronavirus.