The cartel unveiled a plan Thursday to reduce output among its 13 members by 1 million barrels per day, and said it would seek an additional 500,000 barrels per day in cuts from longstanding allies including Russia.
Russia, the cartel’s main partner, still needs to sign on, according to Iran’s oil minister. OPEC and its allies are scheduled to meet Friday in Vienna.
The new cuts would run through the second quarter of 2020. Existing cuts of 2.1 million barrels per day by OPEC and Russia would be extended through the end of the year under the plan.
Brent crude futures, the global benchmark, rose slightly on the news to $51.21 per barrel but are still trading more than 25% below their recent high in January. US oil is trading at $47.07, also more than 25% below its recent peak.
Most of the reduction in demand can be traced to China, where the coronavirus has caused what IHS Markit describes as an “unprecedented stoppage” of economic activity.
Goldman Sachs told clients this week that OPEC needed to agree to curb production by at least 1 million barrels per day in order to avoid a “sharp” sell-off.
The investment bank now believes that oil demand will shrink in 2020. Before the coronavirus outbreak, it expected demand to increase by 1.1 million barrels per day.
— John Defterios and Cristiana Moisescu contributed reporting.