Possibility of OPEC+ Meeting Postponement Raised... Will Oil Production Cut Agreement Fail? (Comprehensive)

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Lee Chun-hee] The planned production cut negotiations between the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC member countries, known as OPEC+, originally scheduled for the 6th, are now highly likely to be postponed.

Major foreign media outlets such as Bloomberg reported on the 4th that the OPEC+ meeting, initially set to be held via video conference on the 6th to discuss crude oil production cuts, may be delayed until the 8th or 9th. The meeting was intended to urgently discuss production cuts to prevent a plunge in oil prices caused by decreased demand due to the spread of the novel coronavirus disease (COVID-19).

However, it is observed that more time is needed before the meeting as Saudi Arabia and Russia engage in a power struggle. Both Saudi Arabia and Russia claim that the other side is responsible for the collapse of the OPEC+ production cut agreement on the 6th of last month (local time), which triggered the oil price competition.

On the 4th, the Saudi Ministry of Foreign Affairs issued a statement titled "The Russian Presidential Office's Announcement Distorts the Truth" through the state-run SPA news agency, stating, "The side that rejected the production cut agreement was Russia," and "Saudi Arabia and the other 22 oil-producing countries tried to persuade Russia to extend the production cut agreement and cut more." The ministry also denied Russia's claim that Saudi Arabia aimed to eliminate U.S. shale oil.

Following the Ministry of Foreign Affairs, the Saudi Ministry of Energy also denied the claim, stating, "Russia's assertion that we withdrew from the production cut agreement targeting U.S. shale oil is not true."

Saudi Energy Minister Prince Abdulaziz bin Salman said, "It is surprising that Saudi Arabia is being portrayed as hostile to the shale oil industry," and added, "Our Russian friends already know that such attempts are false."

Minister Abdulaziz pointed out, "The person who first told the media that 'all oil-producing countries participating in the negotiations would be exempt from production cut obligations starting in April' was the Russian Energy Minister," adding, "Because of this, each oil-producing country increased production to compensate for losses caused by low oil prices."

Earlier, Russian President Vladimir Putin, on the 3rd, expressed a positive stance toward U.S. President Donald Trump's proposal for production cuts but said, "Russia was not the side that caused the collapse of the OPEC+ production cut agreement on the 6th of last month," shifting responsibility to Saudi Arabia. He also said, "Saudi Arabia's withdrawal from the OPEC+ agreement, increasing production and discounting oil prices, appears to be an attempt to outpace competitors producing shale oil (the U.S.)."

President Donald Trump of the United States
[Photo by AP News]

U.S. President Donald Trump's recent remarks that both Saudi Arabia and Russia want market stability amid oil market instability present a completely opposite scenario.

On the 3rd (local time), at a roundtable meeting with CEOs of U.S. energy companies at the White House, President Trump said that both Crown Prince Mohammed bin Salman of Saudi Arabia and President Vladimir Putin of Russia want something to happen that will stabilize the global oil market.

President Trump said he had spoken with President Putin and Crown Prince bin Salman about oil production, adding, "We will resolve this and reclaim our energy business."

According to Bloomberg News, the CEOs of the largest U.S. refining and oil production companies met that day to discuss potential relief measures the administration could take, including possible production cuts in the U.S.