In an attempt to curtail the downward plunge of global oil prices, Russia is considering supporting cuts among OPEC and its partners. On Thursday, Sergey Lavrov, Russia’s top diplomat, confirmed Russia’s support for production cuts following a conversation between President Putin and the King of Saudi Arabia. However, Energy Minister Alexander Novak said on Friday that Russia needs a few days analyze the oil market and clarify its position.
With global chatter circling around the latest mass scale respiratory ailment, the coronavirus, there is global glut of petroleum fuels. Like SARS, in 2003, the coronavirus is thought to spread through respiratory droplets being transmitted form one person to another (i.e., sneeze or cough). With the potential for person to person transmission being so high, major travel has been hindered by the fear of either spreading or acquiring the new virus. With more than 17,000 cases already and growing, there is now concerns on how to handle the temporary glut of fuels in the market.
The OPEC meeting that concluded today in Vienna ended with ministers approving productions cuts for the first quarter of 2020. The cuts for OPEC+ will be increased from 1.2 million bpd to 1.7 million bpd. A 500,000 bpd cut should be painless for the organization as they are currently at over-compliance with the cuts as a group. Saudi Arabia has been carrying a large portion of the cuts to compensate for the group’s non-compliant members including Iraq, Russia and Nigeria. The group is now tasked with divvying up the cuts and enforcing the members compliance with the cuts.