Page 4 - MEOG Week 08

MEOG Commentary MEOG
Three OPEC countries
considering deeper
output cuts
For several weeks NewsBase has been covering the impact of the coronavirus on oil prices and policy; the issue continues to be a major factor in the industry.
oPeC
What:
OPEC has not been able to agree a policy on cuts to balance the fall in demand for oil.
Why:
OPEC producers are considering joint production cuts.
What next:
Russia has been unable to confirm its policy.
SAUDI Arabia and its Gulf Arab neighbours and large fellow OPEC producers the UAE and Kuwait are discussing this week a potential joint oil production cut of 300,000 barrels per day (bpd) in response to depressed demand amid the coronavirus outbreak, taking a break from the OPEC+ alliance with Russia, The Wall Street Journal reported on Friday, quoting people with knowledge of the issue.
Saudi Arabia, the UAE and Kuwait are the largest, third-largest and fourth-largest pro- ducers in the cartel respectively, and they hold together more than half of OPEC’s production capacity.
The reported discussions about a three-way joint cut would be a break from the OPEC+ pact format with Russia, on which the Saudis have been relying for oil supply and price-fixing poli- cies in the past four years.
Since the start of 2017, when OPEC and its Russia-led non-OPEC partners began their pro- duction cuts to prop up prices and erase the glut, OPEC’s leader Saudi Arabia has always acted in concert with Russia in the formal taking of deci- sions about production policies.
So far, Russia has always been on board with the cuts, although it has always announced its position at the last possible moment.
However, the coronavirus outbreak that has shattered oil demand seems to have fractured the Saudi-Russian alliance, and the partners have been at odds over how to respond to the slump in oil demand in the key oil growth market, China.
While Saudi Arabia has been pushing for deeper cuts in Q2 to cushion the blow to oil demand, Russia has been reluctant to cut deeper — it has taken its time to review an OPEC+ group’s joint technical committee (JTC) pro- posal and has been avoiding making a direct reply concerning its position for several weeks.
On Thursday, Russia’s Energy Minister Alex- ander Novak again dodged coming up with a specific reply and reiterated that Russia had not made a decision yet and was continuing to hold discussions with its partners.
Meanwhile, Saudi Energy Minister Prince Abdulaziz bin Salman has reportedly com- pared the coronavirus impact on demand to a “house on fire,” Bloomberg reported this week, quoting anonymous sources who had heard the
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w w w . N E W S B A S E . c o m Week 08 26•February•2020