The Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, has decided to cut production by up to 1.5 million barrels per day. The decision is believed to be conditional on approval from Russia.
The production cut will be OPEC’s deepest since the 2008 financial crisis.
OPEC and its allies, including Russia, are also expected to keep existing cuts of 2.1 million bpd, which expire this month, in place until the end of 2020.
“We now convene at a time when the outbreak of Covid-19 has had a pronounced adverse impact on economic and oil demand forecasts in 2020,” Algeria’s energy minister and current OPEC president Mohamed Arkab told the oil cartel ministers.
“Complex challenges require collegiality and concerted action,” he added.
A meeting of both OPEC and non-OPEC members, sometimes referred to as OPEC+, will take place on Friday.
If they agree to remove an extra 1.5 million bpd from the market, it would bring the group’s overall output reduction to 3.6 million bpd or about 3.6 percent of global supplies.
After meeting with his Saudi counterpart in Vienna on Wednesday, Russia’s energy minister returned to Moscow for consultations but will be back in Vienna on Friday. So far, Moscow has indicated it would back an extension but not a deeper cut.
Goldman Sachs said this week that OPEC will need to agree to curb production by at least one million barrels per day in order to avoid a “sharp” sell-off.
Oil demand has been hit hard by the Covid-19 outbreak, with prices plummeting 20 percent this year.
Oil prices initially jumped after the announcement on Thursday, but later retreated. As of 14:20 GMT, International benchmark Brent was trading about one percent lower at $50.65 per barrel. US West Texas Intermediate (WTI) stood at $46.48, down around half-a-percent.
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