Last updated on February 23rd, 2023 at 07:02 am
Russia doesn’t seem to be seeing eye-to-eye with its OPEC counterparts on oil cut issues erupting due to the COVID-19 pandemic hitting the world.
Moscow is said to have opposed a Saudi plan that intends to ask OPEC and its allies to make drastic crude-production cuts.
It has been confirmed that the coronavirus outbreak has further eroded demand amid a global oil glut.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies are trying to reach a 23-nation consensus on oil production cuts. This would be decided over a special gathering this week in Vienna where the virus COVID-19 virus’ impact on oil demand worldwide will be a key point of discussion.
Under its position as the de-facto leader, Saudi Arabia has the muscle strength to push all its partners and is now pushing for a reduction in collective output by 1.2 million barrels a day. Industry experts feel that while the cut by OPEC will help normalize oil demands and inventories later, it will lead to the challenge of stockpiles as well.
Further, even additional production cuts of 1 million barrels a day from the group would fall well short of the 2.1 million barrels a day of expected global demand loss in the first half of 2020 from the coronavirus.
But this seems to be the only way to balance out the steep divide between the demand and supply. However, Russia is not willing to side on this settlement. Despite its best efforts, Saudi Arabia has not been able to get Russia on its side and is now considering going ahead with a large portion of the production curbs on its own, possibly with key allies Kuwait and the United Arab Emirates.
Russia is wishing to resist a price cut till the last minute. But technically, this will not work in their favour because the higher price bracket is what helps them finance their military operations abroad, a source confirmed to the media.
Saudi Arabia needs prices at least $10 higher to cover its national spending. It also fears a further reduction if the pandemic hits the big oil consuming centres in Western Europe and the U.S.
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