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BUSINESS Saturday 7 March 2020
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Oil price dives as OPEC, Russia fail to agree on output cut

Associated Press With oil under $50 a barrel,
VIENNA (AP) — OPEC and U.S. producers, including oil
key ally Russia failed to giants such as Exxon, are
agree Friday on a cut to scaling back drilling as their
oil production that would profits get hit. The oil patch
have contained the has already been shed-
plunge in the price of crude ding thousands of jobs and
caused by the new coro- suffering through a surge
navirus outbreak's massive of bankruptcies, and low-
disruption to world business. er prices will exacerbate
The price of oil fell sharply in those problems.
international markets as a Barkindo said OPEC was
result, with the international determined to avoid a
benchmark plunging 9.4%, repeat of the big market
down by a third since the slump that began in 2014,
start of the year. when the cartel held off
While cheaper oil will trans- production cuts in order to
late into more affordable not lose market share to a
energy for consumers and resurgent U.S. oil industry.
businesses, it hurts produc- That led to a fall in the price
ing countries and compa- of oil from over $100 a bar-
nies. Thousands of workers rel to below $40 by 2015.
have already been laid off Even if OPEC and its al-
in the U.S. oil patch. lies agree on a production
The unraveling of the talks Russia's Minister of Energy Alexander Novak arrives for a meeting of the Organization of the Petro- cut in the coming days or
in Vienna also underscores leum Exporting Countries, OPEC, and non OPEC members at their headquarters in Vienna, Austria, weeks, analysts say prices
the limited power of the Friday, March 6, 2020. are unlikely to rise much.
cartel to influence world Associated Press That's because the global
energy markets, unlike its economy is slowing rap-
heyday in the 1970s. The better than Saudi Arabia global economy may shrink on Friday. It had been trad- idly. But also because the
United States recently be- can and appears reluctant in the first quarter for the ing over $50 in recent days, the U.S., which is not part
came the world's biggest to slash output of its main first time since the financial and is down from $69 as of OPEC and unlike Rus-
oil producer and keeps on revenue-making export. crisis, sapping demand for recently as early January, sia does not cooperate in
pumping at full capacity. While Saudi Arabia can energy. before the outbreak. its output decisions, has
The 14 OPEC countries had produce oil cheaply, it The international bench- The U.S. benchmark WTI ramped up in recent years,
wanted to cut output by needs $83.60 per barrel to mark for crude oil fell $4.72 plunged $4.62, or 10.1%, flooding the market and
1.5 million barrels a day, or balance its state budget, to settle at $45.27 a barrel to settle at $41.28 a barrel. keeping prices down.q
about 1.5% of world pro- according to the Interna-
duction. OPEC countries tional Monetary Fund, as it
like Saudi Arabia and Iran is almost exclusively depen-
say they need non-mem- dent on oil revenue. Russia U.S. consumer borrowing up a
ber allies like Russia to take needs only $42.40 a barrel.
struggle to keep oil prices moderate $12 billion in January
500,000 barrels of that cut Analysts say OPEC may
on themselves.
Russia, however, proved from falling further, particu-
reluctant and OPEC Secre- larly as the full impact of By MARTIN CRUTSINGER strongest increase since and lenders — pull back
tary General Mohammed the virus outbreak on the AP Economics Writer August. as the coronavirus takes
Barkindo of Nigeria said Fri- global economy has yet to WASHINGTON (AP) — Consumer borrowing is a toll on confidence and
day that the meeting had be understood. U.S. consumer borrowing closely followed for clues it growth," analysts at Oxford
been adjourned. "There is still too much un- slowed in January as bor- can give about the willing- Economics said in note to
"At the end of the day, certainty regarding the rowing on credit cards ness of households to go clients.
there was the general amount of demand de- declined following a huge into debt to support their However, many analysts
painful decision of the joint struction," analysts at re- surge in December. spending, which accounts believe the adverse effects
conference to adjourn the search firm Petromatrix said The Federal Reserve said for 70% of economic activ- are likely to be short-lived.
meeting," Barkindo said. He in a note to investors. Friday that consumer credit ity. They note that the econo-
said informal talks would The spread of the corona- rose by $12 billion following The current economic ex- my had good momentum
continue because the situ- virus has sharply reduced a $20.3 billion surge in De- pansion, now in a record going into last week when
ation was urgent. air travel and thus the de- cember. The December 11th year, has been pow- the spread of the virus in
"The numbers are clear: mand for fuel, while indus- number reflected the big- ered by consumer spend- China and beyond caused
The demand destruction is try in China, the world's gest increase in borrowing ing, which has helped to the U.S. stock market to suf-
real," he said. second largest economy, on credit cards in two de- offset weakness in such ar- fer its worst week of losses
Barkindo said "one or two" has been severely disrupt- cades. eas as business investment since the 2008 financial cri-
non-OPEC countries at the ed through shutdowns and However, in January, credit and trade. sis.
talks Friday had been re- travel restrictions. German card use fell by $3.04 billion But there are worries that The 3.4% gain in overall
luctant to agree to the pro- airline Lufthansa said Fri- following the revised gain the rapidly spreading coro- credit pushed the total to
posed cuts. day it and its subsidiaries of $11 billion in December. navirus could disrupt con- a new record of $4.2 trillion.
Russia and other non-OPEC will reduce their capacity The category that includes sumer activity enough to The Fed's monthly consum-
countries have been work- over the coming weeks to auto loans and student harm the economy. er credit report does not
ing with the cartel in recent as little as 50% of the level loans increased $15.1 bil- "We expect a fairly stable cover home mortgages or
years and agreed on ear- before the coronavirus cri- lion in January. That was pace of credit growth in any other loans secured by
lier cuts. However, Russia sis started. up from a $9.2 billion gain 2020, but the risk is to the real estate such as home
can tolerate low oil prices Some economists think the in December and was the downside if consumers — equity loans.q