Opec members and their allies have been advised to extend their oil supply cuts until the end of the year in response to the coronavirus epidemic causing chaos throughout global markets.
Existing “voluntary adjustments” — totalling 1.7 million barrels of oil per day (bpd) — agreed by members of both Opec and the wider Opec+ alliance in December had been due to expire in March.
The recommendation follows a series of crunch talks in Vienna last week by the group’s Joint Technical Committee (JTC), which advises energy policymakers of the world’s most prolific oil-producing countries.
Opec+ advisory panel also recommends additional supply cuts until mid-2020
The panel also proposed the introduction of “additional adjustments” to output until the end of the second quarter — although no exact figures for this were given.
Last week, it was reported that extra cuts of 600,000 bpd had been discussed behind closed doors, but Russia had been resistant to the idea.
The JTC advises the group known as Opec+, the inter-governmental organisation of key oil-producing nations comprising Opec and non-Opec members and ostensibly led by Saudi Arabia and Russia.
Algerian energy minister and president of the 2020 Opec conference Mohamed Arkab said: “The coronavirus epidemic is having a negative impact on economic activities, particularly on the transportation, tourism and industry sectors, particularly in China, and also increasingly in the Asian region and gradually in the world.
“The situation is clear — it requires corrective action in the interest of all.”
A meeting of Opec members and their allies is due to take place in early March, at which final policy decisions are expected to be made.
Coronavirus has sent oil prices plummeting
The world’s biggest oil producers had already been implementing sweeping supply cuts — agreed in December under the Declaration of Cooperation — in a bid to shore up prices impacted by a global oversupply resulting from rising US shale gas production.
As part of the pact, Saudi Arabia had agreed to an additional output decrease of 400,000 bpd — taking the overall adjustment by Opec+ members to 2.1 million bpd.
These temporary measures were due to be revisited at the March ministerial meeting of member countries, but the coronavirus outbreak across China — the world’s biggest crude importer — has battered oil markets since January and prompted calls for industry intervention.
Falling demand for petroleum in the country, driven by quarantine measures and a general economic slowdown resulting from the spread of the infection, has forced down commodity prices at a significant rate, causing alarm among traders.
Brent crude is currently priced as low as $54 per barrel — compared with the near-$70 per barrel mark at the start of the year.
Earlier this week, UK oil major BP warned the health crisis could slash global oil demand by between 300,000 bpd and 500,000 bpd — a 40% drop in projected global demand growth.
