The oil-producing countries of the OPEC cartel are calling for a deep production cut of 1.5 million barrels per day to support prices that are sagging due to the spread of the coronavirus.
The proposal, however, assumes that non-member allies like major producer Russia, who will take up the proposal Friday, will agree to the cuts.
Iranian Oil Minister Bijan Zangeneh said at Thursday's meeting in Vienna that the cut would start in the second quarter of the year and, asked if he had a “Plan B” if Russia did not go along, replied: “No, we have no other plan.”
OPEC issued a statement saying that member countries would cut 1 million barrels per day under the proposal, while non-members would share a further cut of 500,000 barrels per day.
Saudi Oil Minister Prince Abdulaziz bin Salman, asked as he left the meeting if Russia was on board, said: “We'll see tomorrow.”
Bjarne Schieldrop, chief commodities analyst at SEB bank, said that “the main expectation is... that Russia will join in with additional cuts.”
He believes that the OPEC countries and their allies will make the necessary cuts to keep the oil price from dropping to $40 or $30 per barrel “but not deep enough to drive it up from its current level of about $50 per barrel in the next few months.”
The meeting of oil ministers from OPEC's 14 countries was visibly affected by the coronavirus as journalists were barred from the headquarters building. They instead set up outside the venue and sought to briefly interview officials arriving for the meeting. Health officials were also seen using infrared thermometers to check entering delegates.
Oil-producing countries are trying to shore up prices amid falling demand. Since the new coronavirus outbreak began in China last month, air travel to the country - the world's second-largest economy - has all but stopped, sapping demand for aviation fuel. Manufacturing output fell sharply as cities with millions of residents locked down to contain the spread of the virus. That has disrupted industries around the world, and major companies have halted business travel out of precaution.
Oil prices stabilized ahead of this week's meeting on expectations that deeper cuts would be agreed. The consensus in the markets had been for a cut of at least 1 million barrels per day, on top of existing cuts. The international benchmark for crude was trading around $51 a barrel on Thursday, down from around $69 at the start of the year.
In December, OPEC oil-producing countries and Russia agreed to cut production by 1.7 million barrels per day, up from the 1.2 million barrel per day cut they had been observing for the previous three years.
Russia, however, appears reluctant to sign up to more cuts. Iran's Zangeneh told the Shana news agency this week Moscow “would resist until the last moment” any production decreases.
Countries have been abiding by the recent cuts unevenly, with some nations quietly producing more than they agreed to. On top of that, OPEC's decisions to cut production have dwindling ability to boost oil prices, in part because the U.S. has been flooding the market with cheaply-produced crude.