DUBAI/LONDON/MOSCOW – OPEC and its allies want to maintain existing oil cuts beyond June when the OPEC+ group is next due to meet to shore up prices and demand, which has been hit by the coronavirus pandemic, four OPEC+ sources said.
Global oil demand has slumped by about 30 percent as the crisis has curtailed travel and economic activity, building up oil inventories globally. Brent crude prices fell 65.6 percent in the first quarter, before the OPEC+ grouping agreed its deepest oil cuts.
OPEC and its allies, led by Russia, who are known as OPEC+, agreed in April to cut output by 9.7 million bpd for May and June, a record reduction. While producers will slowly relax curbs after June, supply reductions will remain to April 2022.
“The ministers want to keep the same oil production cuts now which are about 10 million bpd, after June. They don’t want to reduce the size of the cuts. This is the basic scenario that’s being discussed now,” one OPEC+ source told Reuters.
OPEC+ meets next in early June to decide on its output policy. Under the deal, the exporting group is set to scale back the cuts to 7.7 million bpd from July until December.
A source familiar with Russia’s thinking did not rule out a rollover of the existing oil cuts beyond June, but added that “it will depend on a market situation”.
Oil prices fell on Wednesday on worries about a possible second wave of coronavirus cases in countries starting to ease lockdowns, while industry data showed a rise in US crude inventories.
The concerns overshadowed a further call by Saudi Arabia for larger production cuts to balance the market following a virus-induced demand slump, after OPEC’s biggest producer said earlier this week it planned to add to cut output again.
Brent crude was down 58 cents, or 1.9 percent, at $29.40, having risen 1.2 percent on Tuesday. US crude was down 39 cents, or 1.5 percent, at $25.39 a barrel, after jumping nearly 7 percent in the previous session.
“While the market feels more comfortable on the supply side of the equation, on the demand side, the focus will continue to revolve around the risks of easing lockdowns,” said Stephen Innes, chief markets strategist at AxiCorp.
