By Barani Krishnan
Investing.com – OPEC is learning that the Russians, and not the Saudis, might be the real power at the cartel. Oil prices posted a fifth-straight weekly loss after Moscow said it needed more time to consider deeper production cuts proposed by OPEC to deal with the collapse in energy demand from the coronavirus crisis.
Brent, the London-traded benchmark for crude oil, settled down 46 cents, or 0.9%, at $54.47 per barrel on Friday after Russian Energy Minister Alexander Novak stalled in giving his government’s assent to suggestions from OPEC’s suggestion that the group and its allies, which include Moscow, cut an additional 600,000 barrels per day in supply.
New York-traded West Texas Intermediate, U.S. crude benchmark, settled down 63 cents, or 1.2%, at $50.32
For the week, Brent fell 6.3% and WTI 2.4%. Combined losses over five weeks stood at more than 22% for both benchmarks, leaving them in bear market territory.
“Oil prices can’t shake off the coronavirus,” Phil Flynn, senior market analyst for energy at the Price Futures Group in Chicago, said.
“Conflicting reports about how well the virus is being contained is raising fears about economic growth” even as OPEC struggles to find a way to support the market from collapse, Flynn said.
Novak said Russia needed more time to decide whether to join any additional oil output cuts by OPEC because, in his opinion, U.S. crude production growth could slow while global demand remains solid.
OPEC has committed to cut as much as 2.1 million barrels per day, or about 2.1% of global demand, this quarter even before the coronavirus outbreak, which has killed more than 630 people and infected another 31,000 in China while spreading to at least 25 countries.
While Saudi Arabia officially leads the 13-member OPEC, Russia’s clout as an ally of the group has grown immensely in recent years, given Moscow’s higher output of crude. While the United States is the world’s number-one producer of oil, the independent structure of U.S. drillers prevents the country from participating in any OPEC cuts, leaving the cartel at the mercy of Russian cooperation.
Despite Novak’s optimism about the current demand for oil, most analysts say refinery demand for crude and airlines’ consumption of jet fuel are falling by hundreds of thousands of barrels per day due to the impact of the coronavirus crisis, particularly from top energy user China.
To make matters worse for market sentiment, U.S. Energy Secretary Dan Brouillette said on Friday the country’s current record production of 13 million bpd could reach as high 15-to-16 million bpd in coming years.