The proposal to cut oil production quota created a division among members of the Organisation of Petroleum Exporting Countries and Russia.
Oil futures ended on a mixed note Thursday, with U.S. prices up but global prices down, as a committee of OPEC members and their allies advocated for cuts to global production to stabilize slumping crude values.
The proposal, however, encountered resistance from Russia, and it requires official approval from ministers of the Organization of the Petroleum Exporting Countries, according to several news reports. The recommendation was made as oil prices have taken a hit from expectations of a slowdown in energy demand, fed by the spread of coronavirus in China
The OPEC+ Joint Technical Committee recommended a cut to production of its members and other allies of 600,000 barrels a day, according to several news agencies.
S&P Global Platts said the recommendation calls for that cut to begin in April and run through June. The JTC meeting in Vienna had been scheduled to end Wednesday, but was extended to an unplanned third day.
However, the committee isn’t a decision-making body and the recommendation must be weighed by OPEC’s oil ministers. Moreover, one key ally and member of OPEC+, Russia, has expressed its reluctance for deeper reductions to global output.
Alexander Novak, Russia’s energy minister, said “I’m not even ready to tell you what we are ready or not ready to do, not fully understanding the situation and clear forecasts for the development of events in connection with coronavirus,” according to the TASS news agency Thursday.
“The decision to hastily hold the special JTC meeting this week had raised market expectations of swift OPEC action,” said analysts at RBC Capital Markets, in a note. However, “the JTC was always going to be an imperfect vehicle for providing production clarity as it only makes policy recommendations based on scenarios to the ministers.”
OPEC+ ministers are scheduled to meet on March 5-6 and haven’t decided to schedule an earlier meeting, according to reports.
