OPEC+ Plans Large-Scale Production Cuts... Last-Minute Variable is 'Russia's Opposition'

Saudi Arabia and Others Aim to Cut Daily Crude Oil Production by 1.2 Million Barrels
Some Forecasts Suggest It Could Reach 1.5 Million Barrels
Russia Still Open to Final Agreement

[Asia Economy Reporter Naju-seok] As the global demand for crude oil decreases due to the novel coronavirus infection (COVID-19), oil-producing countries are pushing for large-scale production cuts. However, Russia is reportedly taking a negative stance on the cuts, suggesting potential difficulties ahead.

On the 4th (local time), the Wall Street Journal (WSJ) reported, citing sources, that the Organization of the Petroleum Exporting Countries (OPEC) is pushing for crude oil production cuts in response to the demand decline caused by COVID-19, but Russia is opposing the move. OPEC member countries, including Saudi Arabia, plan to discuss the production cuts over two days on the 5th and 6th in Vienna, Austria.

According to reports, OPEC members are considering reducing daily crude oil production by 1.2 million barrels to respond to the decreased demand due to COVID-19. On the other hand, Russia is known to favor maintaining its current production levels.

Initially, OPEC discussed cutting daily crude oil production by 600,000 barrels to prepare for the demand drop at the early stage of the COVID-19 outbreak. However, the target for production cuts was later increased to 1 million barrels and then to 1.2 million barrels. Some officials even speculate that the production cut scale could rise to 1.5 million barrels.

Since the COVID-19 outbreak, disruptions in production and consumption worldwide, starting with China, have caused oil prices to fall below $50 per barrel.

Global investment bank Goldman Sachs has also forecasted that crude oil demand will decrease by an average of 2.1 million barrels per day until the first half of this year.

The key issue is whether Russia will agree. OPEC has formed the OPEC+ consultative group with non-OPEC oil-producing countries such as Russia to discuss oil supply and demand. Saudi Arabia, the de facto leader of OPEC, has been trying to persuade Russia, the representative of non-OPEC countries, on the necessity of production cuts. However, Russia has taken a passive stance on cuts, citing supply issues in Libya and Venezuela.

Within and outside OPEC, there are voices suggesting that Russia will ultimately agree to production cuts as it does not want oil prices to fall further. Russia’s opposition to cuts is seen as a strategic judgment to bear only a small share of the production cut burden.

An OPEC official said, "At the final moment, (Russia and others) will reach an agreement on production cuts," adding, "Saudi Arabia will bear the major burden of the cuts, while Russia will have a relatively smaller share of the burden."

This content was produced with the assistance of AI translation services.