Oil slid nearly 1% today as worries about global oil demand and economic growth slowdown caused by the coronavirus outbreak were heightened by concern over non-OPEC crude producers not yet having agreed to cut output further to support prices.
Brent crude fell 48 cents, or 0.96%, to $49.51 per barrel by 0337 GMT, while U.S. West Texas Intermediate (WTI) was down 38 cents, or 0.83%, at $45.52 per barrel, CNBC reported.
The Organization of the Petroleum Exporting Countries (OPEC) on Thursday pushed for crude output by OPEC and associated producers — a group known as OPEC+ — to be cut by an extra 1.5 million barrels per day (bpd) in total until the end of 2020. The call came ahead of an OPEC+ meeting scheduled for Friday in Vienna.
Non-OPEC states were expected to contribute 500,000 bpd to the overall extra cut, OPEC ministers said. But Russia and Kazakhstan, both members of OPEC+, said they had not yet agreed to the deeper cut, raising the risk of a collapse in cooperation that has propped up crude prices since 2016.
A leading analyst of the National Energy Security Fund, a lecturer at the Financial University under the Government of the Russian Federation, Igor Yushkov, speaking to Vestnik Kavkaza, noted that Russia contributed to the decline in prices. "It is still unclear whether Russia is committing to an additional oil output cuts or not. The OPEC deal has a huge problem - a lack of trust. When someone refuses to fulfill their quotas, there is a big risk that others will no longer fulfill their as well. And the deal will fall apart quickly if Russia refuses to fulfill it," he explained.
Also, the fact that an additional cut in oil output by 1.5 million barrels per day will last only until the summer also affects the mood of traders. "In principle, this is logical, and Russia could agree to such a compromise. The trouble is that the market reacts negatively to such an idea, perceiving the new agreement as insignificant if production remains at the same levels in the long run," Igor Yushkov pointed out.
