Rising expectations that some of the world’s major oil producers will agree to production cuts appeared to steady oil prices on Monday.
But as the coronavirus continues to fan out across the globe, sapping economic activity, analysts were doubtful that a cut in production of as much as one million barrels a day would be enough stem a weekslong slide in prices.
Officials from the Organization of the Petroleum Exporting Countries and Russia are expected to meet in Vienna this week to try to halt plunging oil prices, which sank about 14 percent last week alone. The spreading coronavirus epidemic is cutting into demand for oil and weakening OPEC’s clout, but the meeting will still be watched closely by market participants because countries representing roughly half of world oil supplies will be present.
Hopes that the gathering will lead to new and deeper production cuts helped lead to price rises on Monday, ending last week’s slide. Brent crude, the international benchmark, rose by about 4 percent to $51.68 a barrel.
President Vladimir V. Putin of Russia bolstered those hopes by suggesting on Sunday that his country was willing to work with OPEC to try to stabilize prices. The markets have been unsettled in recent weeks by Russia’s reluctance to join OPEC in an emergency meeting to discuss output trims to offset the effects of the coronavirus outbreak.
Instead, OPEC and Russia in early February convened a technical committee that recommended cuts of around 600,000 barrels a day. Now, after the virus has spread to at least 65 countries and oil prices have fallen further, the Saudis and other OPEC members are likely to push for larger cuts of one million barrels a day.
Russian officials have argued in the past that it was too early to fully understand the full impact of the coronavirus and that an existing shortfall of about one million barrels a day, caused by political turmoil in Libya, was helping to offset reduced demand from the virus outbreak.
Mr. Putin told a group of energy officials on Sunday that although Russia had sufficient financial reserves to weather upcoming economic storms, the country’s three-year alliance with OPEC had “proved to be an effective instrument to ensure long-term stability on global energy markets,” Reuters reported.
Analysts say Russia now seems likely to support additional production cuts at this week’s meeting, which was scheduled in December. One reason: Continued discord with OPEC might lead to further price plunges.
“Nothing concentrates a producer’s mind like the prospect of a crude oil price bust,” said Robert McNally, president of Rapidan Energy Group, a market research firm.
In 2014, after failing to bring Russia and others on board for production trims, Saudi Arabia, OPEC’s de facto leader, walked away from market management efforts, leading prices to eventually fall below $30 a barrel. That rupture led to the 2016 accord between OPEC and Russia that helped prop up the markets for three years.
In addition, Russia’s participation is likely to come relatively cheaply. So far, the Russians have contributed relatively small amounts to production cutbacks, while the Saudis, with help from their Persian Gulf allies, Kuwait and the United Arab Emirates, have absorbed the bulk of the cuts. This pattern is likely to continue, analysts say.
Brent prices have fallen about 20 percent since late January. Forecasts of demand for oil this year are being lowered as the spreading coronavirus outbreak cuts into air travel and other activity.
On Monday, for instance, the Organization for Economic Cooperation and Development said that if the outbreak swept widely through the Asia-Pacific region, Europe and North America, global growth could fall to 1.5 percent this year, half of the 3 percent it had projected before the virus surfaced. That puts pressure on prices, and OPEC, despite all the barrels it commands, will struggle to reverse the trend, analysts say.
“It is not really in their hands,” Bhushan Bahree, senior director at IHS Markit, a research firm, said of the OPEC group. “They are just chasing demand down; people don’t want to buy their oil and don’t have a need for it.”
Mr. McNally said OPEC and Russia needed to make a further cut of about one million barrels a day, or about 1 percent of world supply, this week in Vienna to help put “a floor under Brent,” or about $40 a barrel. Even a cut of that order, he said, which would come on top of 2.1 million barrels a day of existing cuts, could prove over time to be insufficient to keep pace with falling demand.
The impact from the “coronavirus could be much more wide reaching and put demand under downward pressure,” he said.
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