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OPEC struggles to win Russian backing for big oil cut amid coronavirus

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OPEC struggles to win Russian backing for big oil cut amid coronavirus
OPEC

Saudi Arabia and other OPEC members struggled on Wednesday to win support from Russia to join them in additional oil output cuts in a bid to prop up prices that have tumbled by a fifth this year because of the coronavirus outbreak.

A panel of several ministers from OPEC, Russia and other producers failed to clinch a preliminary agreement for additional cuts, OPEC sources said.

At the panel meeting in Vienna, the sources said Russia proposed keeping existing cuts by the group known as OPEC+ until the end of the second quarter.

Saudi Arabia wants extra cuts of 1 million to 1.5 million barrels per day (bpd) for the second quarter while keeping existing cuts of 2.1 million bpd in place until the end of 2020.

READ ALSO: OPEC+ panel calls for more oil cuts -Algeria

Russian Energy Minister Alexander Novak, who had held talks with his Saudi counterpart Prince Abdulaziz bin Salman earlier on Wednesday, left the meeting of the panel, known as the Joint Ministerial Monitoring Committee, after three hours of talks.

Sources said Novak went to Moscow for more consultations and would return for the full OPEC+ meeting on Friday, while OPEC will hold its full ministerial meeting on Thursday.

“OPEC hopes for a cut bigger than 1 million but the challenge is still Russia,” one OPEC source said.

The Saudi and Russian ministers have made no public statements so far since arriving in the Austrian capital.

The talks in Vienna were following a familiar pattern to previous meetings. In the past, Moscow had initially been hesitant before ultimately agreeing to joint cuts with OPEC.

Benchmark Brent oil prices LCOc1, which had been up 2% earlier on Wednesday, were trading down 1% near $51 a barrel later in the day on news Russia was still resisting new steps.

At those levels, oil prices are too low for many OPEC states to balance their budgets, although Russian President Vladimir Putin has said the level was acceptable for Moscow.

READ ALSO: OPEC members meet to mull output cuts over virus outbreak

Moscow has said it is worried by the rise of shale oil in the United States, which is not part of OPEC. U.S. producers have boosted output at the expense of the group.

Sources had told Reuters earlier this month that OPEC could agree deeper cuts even without Russia.

But two OPEC sources said Riyadh did not want to carry most of the burden of cuts alone and was pressing Moscow to join in with a proper contribution.

“Cuts will need to at least be towards the top end of the range, as we see further downward revisions in demand growth as Covid-19 spreads,” Warren Patterson from ING said in a note.

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