Oil slides amid Saudi-Russia discord on OPEC+ production cuts

Oil slipped amid a split between Saudi Arabia and Russia over whether deeper production cuts are required to offset the demand hit from the coronavirus epidemic.

Futures fell 0.9 per cent in New York on Wednesday. The first day of OPEC+’s Joint Ministerial Monitoring Committee meeting culminated in Russian Energy Minister Alexander Novak leaving the gathering amid disagreement on the scope of proposed oil production curbs.

Riyadh has pushed for a supply reduction as big as 1.5 million barrels a day, while Moscow favors maintaining output at current levels through to the end of the second quarter. Saudi Energy Minister Prince Abdulaziz bin Salman said the committee made a “wonderful” recommendation but declined to provide details. OPEC+ ministers will discuss the recommendation at talks in Vienna on Thursday and Friday.

“OPEC’s meeting falling apart hurt the momentum oil had built,” said John Kilduff, a partner at Again Capital LLC in New York. “The market is going to need production cuts if it is ever going to stabilize.”

The coronavirus outbreak has worsened since the Joint Technical Committee first recommended a production cut of 600,000 barrels a day in February.

OPEC and its allies are widely expected to agree on deeper output cuts, but it’s not clear whether that will be enough to bolster oil. Goldman Sachs Group Inc. and two consultants said they expect demand to shrink in 2020 for only the fourth time in nearly 40 years.

Italy announced a nationwide closing of its schools until March 15 in an effort to curb the worst outbreak in Europe while, in the US, Los Angeles County reported six new cases. Total coronavirus cases globally topped 93,000.

Meanwhile, government data showed that US oil stockpiles rose by 784,000 barrels last week, well below the 3 million barrel forecast by analysts in a Bloomberg survey.

US crude oil production hit an all-time high at 13.1 million barrels a day, according to the US Energy Information Administration. The market also got some support from the bigger-than-expected draws in gasoline and diesel stockpiles.

West Texas Intermediate futures for April delivery fell 40 cents to settle at $46.78 a barrel on the New York Mercantile Exchange.

Brent futures for May fell 73 cents to $51.13 a barrel on the ICE Futures Europe exchange, putting its premium over WTI at $4.18.

The market’s structure remains weak and options pricing is at its most bearish since June.