UPDATE: Russia Refuses OPEC Output-Slash Deal, Says Coronavirus might not affect Global Energy Demand

OPEC’s plans for deep and prolonged oil cuts have been derailed as non-OPEC Russia refuses to support the move. Reports say the Russian argument is that, it is too early to predict the impact of a coronavirus outbreak on global energy demand.

Failure to secure a deal between OPEC, Russia and other members of an alliance known as OPEC+ that has propped up prices since 2016 could destabilise oil prices. Brent crude has already lost a quarter of its value this year, tumbling below $50 a barrel—a level that puts OPEC budgets under severe strain. With this refusal from Russia, oil prices have plunged even lower.

Sources have it that the Russian Energy Minister Alexander Novak told OPEC that Moscow was only ready to discuss extending existing output cuts. “That position won’t change,” the Russian source said as OPEC+ ministers gathered at OPEC’s Vienna headquarters, where formal talks designed to thrash out a deal were postponed for hours as ministers held bilateral talks.

Ministers from the Organization of the Petroleum Exporting Countries said the coronavirus outbreak had created an “unprecedented situation” that demanded action, as measures to stop the virus spreading dampens global economic activity and oil demand.

Slashes in Global Oil Demand

Forecasts for 2020 demand growth have been slashed but Moscow has long argued it was too early to assess the impact and sources said Novak delivered the same message on Friday.

OPEC ministers said, on Thursday, that they backed an additional 1.5 million barrels per day (mbpd) of oil cuts until the end of 2020. Equal to around 1.5% of global demand, that is a much bigger and more extended move than expected. However, that proposal was made conditional on Russia and other non-OPEC producers backing the curbs.

So, during the OPEC+ meeting, inside the OPEC headquarters informal consultations continued for more than five hours. In fact, the official meeting of OPEC+ ministers was delayed for several hours from its scheduled start at 0900 GMT.

READ MORE: Price Regulation: Coronavirus causes OPEC to slash Global Oil Demand Forecast for 2020

Existing cuts by OPEC+ amount to 2.1 million bpd, but those have failed to support oil prices. The proposed new cuts would be on top of existing curbs due to expire in March. OPEC ministers have also called for extending the existing deal, taking total supply reductions to about 3.6 million bpd or about 3.6% of global supplies.