Can Opec convince Russia to agree to deeper production cuts?

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Opec's Push for Deeper Production Cuts Faces Hesitation from Russia

Opec has proposed an additional oil output cut of 1.5 million barrels per day (bpd) until the end of 2020, a measure intended to counteract the negative impact of the coronavirus outbreak on oil prices. However, key non-Opec partners, notably Russia and Kazakhstan, have not yet agreed to this deeper reduction, raising concerns about the future of the Opec+ cooperation framework.
Opec's Proposal and Market Concerns

Opec ministers, meeting in Vienna, announced their intention to implement a significant output reduction, exceeding the previously anticipated 1 million bpd. This move comes as the group acknowledges an "unprecedented situation" in the market, with the coronavirus pandemic significantly dampening global economic activity and, consequently, oil demand. The proposed cut, if enacted, would bring the total Opec+ reduction to 3.6 million bpd, marking the largest supply cut since the 2008 financial crisis.
Russia's Stance and Potential Consequences

Despite Opec's push for a unified front, Russia, a crucial member of the broader Opec+ alliance, has indicated a lack of agreement on the deeper cuts, with its energy minister suggesting talks were focused on extending existing curbs only until June. Russian Finance Minister Anton Siluanov has also stated a readiness to accept a price drop if a deal is not reached. There is a palpable risk that if Russia does not concede, Saudi Arabia, Opec's largest producer and a strong proponent of substantial cuts, might advocate for the complete removal of Opec production limits.
Historical Context and Market Impact

Opec+ has maintained production cuts totaling 2.1 million bpd under an existing agreement. Historically, Russia has shown hesitation in negotiations but has ultimately joined deals at the last minute. However, Opec sources suggest that discussions with Moscow have been more challenging this time. If Saudi Arabia were to revert to full production without a broader agreement, analysts predict oil prices could plummet to between US$25 and US$30 a barrel, a level that would be detrimental to both Opec members and Russia, who have indicated their fiscal break-even points are significantly higher.

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Can Opec convince Russia to agree to deeper production cuts?

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