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Russia halts OPEC oil production cut amidst Coronavirus panic (Video)

The Duran Quick Take: Episode 490.

The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris discuss meetings held in Vienna for the Organization of Petroleum Exporting Countries (OPEC) cartel and OPEC+, which resulted in an impasse for negotiating production cuts amidst the coronavirus outbreak. Crude prices hit 2017 lows.

OPEC+ leader, Russia, does not want to cut oil production and instead is calling for a “stimulus”. Saudi Arabia, the United Arab Emirates and other OPEC countries are desperate for further cuts, as demand for their own oil is declining.

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OPEC and non-OPEC allies failed on Friday to agree on how much oil production to cut amid the coronavirus outbreak, with Russia reportedly refusing to give the green light to the deepest supply cuts since the global financial crisis.

Oil prices initially slipped Friday afternoon on reports that Moscow said it wasn’t prepared to approve a further reduction in production. Later, Reuters also reported that OPEC and its allies had even failed to agree on rolling over existing cuts, further weighing on crude prices. Then a statement by the oil group said it would continue discussions and made no mention of any cuts.

Russian Energy Minister Alexander Novak told reporters leaving the meetings in Vienna on Friday that it meant that members could now pump what they liked starting April 1.

“We have made this decision because no consensus has been found of how all the 24 countries should simultaneously react to the current situation. So as from April 1, we are starting to work without minding the quotas or reductions which were in place earlier but this does not mean that each country would not monitor and analyse market developments,” he said.

International benchmark Brent crude skidded to $45.46 Friday afternoon, down over 8%, while U.S. West Texas Intermediate sank to $41.93, also around 8% lower. Both benchmarks were trading at lows not seen since 2017.

Brent futures have fallen more than 30% since climbing to an early January peak, with WTI down almost one-third over the period.

OPEC on Thursday recommended additional production cuts of 1.5 million barrels per day from the beginning of next month until the end of the year. The 14-member group had scheduled a meeting on June 9 to review the policy.

The proposal was conditional on support from non-OPEC producers, including Russia. OPEC cautioned that the deal could only be applied on a pro-rata basis with core members set to cut 1 million bpd and non-OPEC partners expected to cut 500,000 bpd.

Analysts had viewed the meeting between OPEC members and non-OPEC producers, referred to as OPEC+, as crucial.

“It is truly a go big or go home moment for this organization,” Helima Croft, head of global commodities strategy at RBC, told CNBC’s Dan Murphy on Friday morning. “If Russia says no today, there are real questions about the viability of the OPEC+ arrangement.”

‘No reason’ to doubt Russia’s commitment

Once again, the disconnect between OPEC powerhouse Saudi Arabia and non-OPEC leader Russia is testing the strength of their three-year energy alliance.

Croft said she believes it is in both the economic and political interests of Moscow’s to stay in the organization, “but a lot is up in the air right now.”

“We have no reason to doubt the continued commitment of the Russian Federation to this partnership,” OPEC Secretary General Mohammed Barkindo told reporters Thursday evening.

“We have repeatedly heard from the highest level of government in the Russian Federation of the commitment of the government to this partnership in the declaration of cooperation,” he added.

Speaking to reporters shortly after OPEC recommended taking 1.5 million bpd off the market for the remainder of the year, Iranian Oil Minister Bijan Zanganeh conceded that the group had “no plan B” if Russia or any other non-OPEC members refused to accept the deal.

The oil producers first committed to curtailing their collective production policy in 2016 in an effort to bolster prices, with the deal coming into force in January 2017.

It was extended last December, and the alliance agreed to curb oil output by approximately 1.7 million barrels per day. Saudi Arabia then opted to cut its own production voluntarily by an additional 400,000 bpd for three months, should fellow members stick to their commitments.

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The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of The Duran.

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Olivia KrothBobValdezThomas MalthausTerry Rgwynn oneill Recent comment authors
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Olivia Kroth

Bravo President Putin! It is a good idea to keep selling oil. It is Russia’s main income.

gwynn oneill

No, it isn’t, or Mercouris says it is 10 percent of their income.

Terry R
Terry R

That 10% is ALL energy as a proportion of GDP which includes oil, gas and coal….so oil is even less than 10%. (see video comment around 4:00 mark)

Thomas Malthaus
Thomas Malthaus

Olivia, Russia’s actual oil income is only about 16% of their budget planning, if that.

Us fracking requires us$80 pb to remain viable, whereas Russia only needs us$18 – 20 pb (paid in roubles) to produce oil. The main reason the seppos what to restrict Iran from selling oil and to control Venezuelan oil is to keep the market artificially high (us$80+ pb) and keep their fracking industry from debt collapse. Russia accepts us$ for oil sales, then uses those us$ to purchase ACTUAL gold, not ‘paper’ gold for it’s reserves.

Olivia Kroth


Financial results for 4Q and 12М 2019 —

19 February 2020 —

2019 Net income jumped by 29% YoY to RUB 708 bln, including RUB 158 bln in 4Q 2019 —

2019 dynamics of unit upstream operating costs was lower than industrial producer price inflation —

12M 2019 EBITDA increased to RUB 2,105 bln —

Financial debt and trading liabilities decreased by RUB 907 bln in 2019

Olivia Kroth

Commenting on 2019 financial results Rosneft’s Chairman of the Management Board and Chief Executive Officer Igor Sechin said: 2019 year was successful in terms of the Company’s financial performance. Net income attributable to the shareholders increased by 29% YoY. Interim dividend for the first half of 2019 amounted to 15.34 RUB/share, which is 5.2% higher than in the first half of 2018. Strong results for the second half of 2019 will allow us to increase the final dividend at a much faster pace, as the Net profit for the period increased by more than 50%. Subject to a relevant decision… Read more »


Oil COMPANY profits, not the Russian budget. Your first post alluded to Russia’s main income being oil, but you quote Rosneft’s earnings, not the Russian Govt’s oil earnings. 😛

Olivia Kroth

Well, I made a mistake, Bob. Sorry! Maybe I should have written instead, “Rosneft is the biggest tax-payer in Russia”, because this is what CEO Igor Sechin writes on the Rosneft website. Of course, it does not mean that Russia lives mainly from its oil revenues. I guess it means that Rosneft is a very big and strong company making a lot of profit. There are other oil companies in Russia, too that that are working very well, for example Lukoil, Rosneftegaz, etc. Overall, Russia is one of the largest oil producers worldwide. It gives Russia immense power, also vetoing… Read more »

Olivia Kroth

WORLD OIL NEWS: Russia’s stronger economy lets Putin stare down OPEC — By NATASHA DOFF AND ANYA ANDRIANOVA on 3/8/2020 MOSCOW (Bloomberg) –Vladimir Putin’s resistance to further output cuts “Thanks to Russia taking harsh measures earlier, Russia can now afford a lower oil price than five to six years ago,” said Dmitry Dolgin, chief economist at ING Bank in Moscow. … Russia now boasts the fourth-biggest international reserves in the world, and some of the lowest debt levels. Putin’s new government still has plenty of room to start increasing spending this year even if oil prices drop closer toward $40… Read more »

Olivia Kroth

TASS: Rosneft to start boosting crude output in April, says Bloomberg — The company could increase output by 300,000 barrels a day within a week or two MOSCOW, March 9. /TASS/. Russia’s top oil producer Rosneft is ready to increase oil production starting April, Bloomberg reported Monday, citing a person close to the company. Rosneft could start boosting output as soon as April 1 (when the current OPEC+ deal ends), the agency said, adding that the company could increase output by 300,000 barrels a day within a week or two. The oil major has prepared for any scenario, Bloomberg said.… Read more »

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