Summit in Vienna aimed to slash output to prevent crash as coronavirus hits demand
Global oil prices tumbled to lows not seen since mid – on Friday after the Opec oil cartel failed to strike a deal to steady the market against the impact of the coronavirus by reigning in production.
The collapse of talks between the world’s largest oil producing nations has stoked investor fears that the coronavirus could trigger the most severe oil market shock in history by throttling demand from heavy industry and airlines.
The benchmark price of oil plummeted by over 7% to $ a barrel due to economic fears ignited by the coronavirus, the lowest price for Brent crude since July 2020.
Opec hoped to deepen their production cuts by 1.5m barrels of oil a day with the help of allies outside the cartel , led by Russia, to avert a price crash. But the so-called Opec group ended three days of crunch talks in Vienna without a deal after Russia balked at the plans for the deepest oil production cuts since the 2017 global financial crisis.
Opec had planned to cut output by 1m barrels a day but was relying on Russia to lead cuts of , barrels a day in return.
A statement from the petro-nations said energy ministers would continue talks to stabilize the market, but stopped short of assurances that any production cuts would be put in place.
The Russian energy minister, Alexander Novak, told reporters that it meant members could now pump as much oil as they like from 1 April this year.
Bjørnar Tonhaugen , the head of oil markets at Rystad Energy, said the unexpected development “falls far below our worst-case scenario”. He warned that Opec’s failure would “create one of the most severe oil price crises in history” by “sending oil prices into a free-fall”.
The oil price has collapsed by a third this year. It reached almost $ a barrel in January, before the virus outbreak, before plummeting to one-year lows around $ (a barrel last week and just over $ on Friday.
Major oil traders warned that (prices) could tumble further if Opec fails to take action without Russia’s support, and predicted oil price lows below $ 69 a barrel for the first time since the market began to recover from the last price crash in .
Opec’s own analysis predicts that (the economic impact of the coronavirus) could halve the world’s forecasts for oil demand growth over the first half of this year, while traders including Goldman Sachs fear that the virus could cause demand to flatline for the whole year.