Oil prices slide as OPEC+ closes in on record production cut deal

Following a brief surge, crude prices slumped again on Thursday, while OPEC and major producers led by Russia are still discussing a new output cut deal, expected to be a record one.

The prices surged by some 12 percent on reports that Russia and Saudi Arabia managed to agree on new production cuts.

The growth, however, was short lived and the prices fell back some ten percent later in the day, as it emerged that no agreement between the Organization of the Petroleum Exporting Countries (OPEC) and non-cartel countries has been achieved.

The long-awaited meeting of the OPEC+ ministers took place on Thursday through a video link. The proposed cuts would see the world’s output reduced by at least 10 or 11 million barrels per day (bpd), according to Iran’s Oil Minister Bijan Namdar Zanganeh.

Certain disagreements still persist within the group – for instance, Mexico refused the proposed cuts and other players have been trying to convince it, an OPEC source told Reuters. Media reports suggested that the OPEC+ even considered curbs as great as 15 to 20 million bpd.

Oil prices entered a downward spiral in early March when OPEC+ countries disagreed on the introduction of new output cuts. The OPEC+ agreement that has been in place for around three years expired at the end of March and Saudi Arabia ramped up its production to a record high of more than 12 million barrels per day.

Apart from the OPEC+ deal downfall, the prices have been affected by the coronavirus pandemic which has greatly reduced the demand for oil, creating even further oversupply.

As the oil-producing countries struggled in achieving a new deal, Moscow insisted that other players, namely the US, should join the output cutting efforts too. Russia is the world’s third-largest oil producer with around 10 million bpd output, dwarfed only by the US and Saudi Arabia.

The US – which is the largest producer with around 15 million bpd output – refused, stating that its production was already falling without any government measures. Russia, for its part, shot back, stating that the deflation of the US shale industry cannot count as an “output cut.”

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