By Agence France-Presse 

Top oil producers were trying to finalize a crucial agreement on output cuts in the small hours of Friday in an attempt to counter a collapse in prices due to the coronavirus and a Saudi-Russian price war.

a12ea777fdd787407d15cc9272b4ef2d6843124f - OPEC puts heads together over oil output cuts

Oil prices are sitting around two-decade lows, hit by the virus and a Saudi-Russia battle for market share (AFP Photo/Frederic J. BROWN)

The video conference meeting of OPEC countries and their OPEC+ allies including Russia, as well as other key non-members, began just after 1440 GMT on Thursday and went on late into the evening.

Iranian Oil Minister Bijan Namdar Zanganeh told state television on Thursday evening that a deal was “80 percent” of the way to being agreed.

“Because of the coronavirus pandemic, if we don’t reduce daily oil production by 15 million barrels per day in May, we will see an excess of supply which will cause a price shock,” Zanganeh said.

Local media reports in Russia and Algeria said that an agreement had been reached to curb output by 10 million bpd, but this has yet to be confirmed.

The meeting is seen as the best chance of providing support to prices that have been wallowing near two-decade lows and avoiding another steep sell-off.

At the beginning of the meeting, OPEC Secretary General Mohammad Barkindo warned that the rapid economic damage wrought by the virus meant the industry’s “supply and demand fundamentals are horrifying”.

“Our industry is hemorrhaging; no-one has been able to stem the bleeding,” Barkindo said, bemoaning companies already filing for bankruptcy and tens of thousands of jobs that have been lost.

Algeria’s Energy Minister Mohamed Arkab also warned of “an intolerable free-fall” in the market, according the APS agency.

– Global standstill –

“The extraordinary producing-countries meeting is the only hope on the horizon for the market that could prevent a total price collapse,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.

Saudi Arabia will on Friday host a separate virtual gathering of energy ministers from the G20 group of major economies in a similar bid to ensure “market stability”.

Oil prices have slumped since the beginning of the year as the COVID-19 pandemic sends large parts of the planet into lockdown and brings the global economy to a virtual standstill.

Compounding the problem, Riyadh and Moscow have both ramped up output in a bid to hold on to market share and undercut US shale producers.

“Saudi Arabia and Russia have been extremely clear that they will cut production if — and only if — other major oil producers join in as well,” said SEB oil analyst, Bjarne Schieldrop.

However, there are worries about the participation of US producers.

The US is battling to breathe new life into its shale industry, which has transformed the nation into the world’s top producer, but which cannot sustain its high cost base as prices collapse.

Yet its oil sector appears reluctant to trim production, having extracted a near-record 13 million barrels per day in the final week of March. This fell to 12.4 million bpd last week.

At the same time, the global supply glut — already weighing on oil markets before the new coronavirus crisis — has stretched oil storage capacity to its limits, forcing many producers to scale back output.

US President Donald Trump on Wednesday told reporters that he wanted to save jobs.

“Obviously for many years I used to think OPEC was very unfair… I hated OPEC… But somewhere along the line that broke down and went the opposite way,” he said.

In his opening statement to the meeting carried by the Rossiya 24 channel, Russian Energy Minister Alexander Novak welcomed the presence of several nations outside the OPEC+ alliance, namely Canada, Norway, Argentina, Colombia, Egypt, Indonesia, Chad, Ecuador and Trinidad and Tobago.

The International Energy Agency warned Monday that the world is set for its first annual decline in oil consumption in more than a decade because of the coronavirus pandemic.

The outbreak has shut down large swathes of the global economy, including key sectors such as air travel, manufacturing and retail.

The global oil glut could reach 25 million bpd in April, according to Rystad Energy.

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