OPEC ministers began arriving in Vienna on Tuesday to attend a group meeting amid discussions about the need for additional oil production cuts to cope with weakening demand due to the global spread of the new coronavirus.
OPEC and allies led by Russia in December agreed to collectively reduce production by 1.7 million barrels per day until the end of March.
Saudi Arabia voluntarily reduced production by another 400,000 barrels per day. Thus, OPEC + actually reduced production by 2.1 million barrels per day.
However, since then, the global outbreak of coronavirus, which began in China, has put pressure on global oil demand, as activity in the industrial sector has slowed and airlines have reduced passenger traffic.
The International Energy Agency (IEA) predicted that global oil demand would decline by 435,000 barrels per day in the first quarter, dropping to its lowest level in the last decade, and noted that this forecast could be revised downward.
OPEC is discussing various measures, including restricting production by another 1 million barrels per day, to stabilize falling prices. Earlier, a decrease in production of 600,000 barrels per day was discussed.
Talk of a bigger cut backed oil prices. Futures on Brent and WTI over the past two days have recovered somewhat after falling more than 20% compared with the January peak.
Russia is not yet convinced of the need for an even greater limitation of production, and some sources said that perhaps OPEC will have to take additional reductions on itself.
However, on Tuesday, Leonid Fedun, vice president of Russia’s second largest oil producer, Lukoil, told Reuters that OPEC’s proposals to reduce oil production by up to 1 million barrels per day are enough to balance the market and return prices to $ 60 per barrel.