By Grant Smith, Dina Khrennikova and Salma El Wardany
The committee did make a “wonderful recommendation” on oil policy, Prince Abdulaziz told reporters. However, he declined to reveal the details, saying he preferred to maintain “suspense.”
The JMMC, which oversees the accord between the Organization of Petroleum Exporting Countries and it allies, didn’t choose between the Russian and Saudi proposals, said a delegate, who asked not to be named because the talks were private. Instead, it has been left to OPEC’s full ministerial meeting on Thursday to consider both approaches.
Oil fell in London.
It isn’t the first time that the two biggest producers in the OPEC+ coalition have appeared to be far apart just days before crucial decisions on oil production. Yet since the group was formed in late 2016, the two nations have usually found a way to resolve their differences and forge a common policy that supports crude prices.
The Kremlin has gained a lot from its cooperation with the Organization of Petroleum Exporting Countries. The country has been the biggest financial beneficiary of the cuts, largely because it’s borne a lesser share than Saudi Arabia. The alliance has also significantly enhanced President Vladimir Putin’s presence on the world stage and his political clout in the Middle East.
“We see more reasons for Russia to cooperate than not, at least for now,” said Matthew Holland, an analyst at consultant Energy Aspects Ltd. “However, the Russian contribution to additional cuts is likely to be nominal unless Riyadh can offer a large carrot.”
Moscow is likely to wait until the last moment to make any decision on whether to back deeper cuts, Iranian Oil Minister Bijan Namdar Zanganeh told reporters before Wednesday’s talks.
Still, pressure on the alliance is greater than ever and its two dominant nations aren’t necessarily aligned.
Saudi Arabia’s push for a big cut reflects mounting concern that growth in fuel consumption could be wiped out this year as the coronavirus outbreak wreaks havoc on the world economy. Oil just suffered its biggest weekly slump since the global financial crisis, falling far too low to balance the budgets of most OPEC members, but not Russia.
“This is a sudden, instant demand shock,” said Jim Burkhard, vice president and head of oil markets at IHS Markit Ltd. “The scale of the decline is unprecedented.”
The coalition is already making deep cuts to offset the U.S. shale boom, agreeing on a fresh supply reduction of 2.1 million barrels a day as recently as December. OPEC’s output last month was the lowest since 2009, when the group implemented the sharpest production cuts in its history at the depths of the global financial crisis.
As OPEC+ debated further production cuts, U.S. oil production surged last week to a fresh record, and net American petroleum exports increased to a record of nearly one million barrels a day on a four-week average.
“This raises a red flag for some OPEC+ members in Vienna, as the U.S. consolidates its status as a global oil exporter, eroding the market shares of Russia and Saudi Arabia,” said Ed Morse, head of commodity research at Citigroup.
With flights canceled in Europe, schools closed in Japan, towns quarantined in Italy and a rising death toll from Iran to Washington state, the coronavirus crisis has gone global, and with it, its impact on energy demand. For only the fourth time in almost 40 years, oil consumption may not grow at all in 2020, according to a growing minority of traders, investors and analysts. Goldman Sachs Group Inc. on Tuesday became the first major Wall Street Bank to forecast a contraction in demand this year.
As well as seeking to forge a deal, members of OPEC+ are also grappling with the risks of bringing together delegations from 23 nations as the disease continues to spread. Medical advisers screened staff and delegates to check for high temperatures and some employees were told to work from home. OPEC told national delegations to limit their size to the “bare minimum.”
Amid the difficult circumstances, OPEC Secretary-General Mohammad Barkindo and Russia’s Novak sought a moment of levity, posting on Twitter a video of themselves performing a handshake with their feet, in keeping with guidelines to avoid bodily contact that could spread the virus.
OPEC has taken the unprecedented step of blocking journalists from entering its headquarters, and has also scrapped the final press conference in favor of a webinar. The cartel’s gatherings typically attract a contingent of hundreds of officials, reporters, TV crews, analysts and consultants from around the world.