NEW YORK (Reuters) – Oil prices tanked over 8% on Friday and hit their lowest since mid-2017 after Russia balked at OPEC’s proposed steep production cuts to stabilize prices as the coronavirus outbreak slows the global economy and hurts energy demand.
Three years of cooperation between the Organization of the Petroleum Exporting Countries and Russia ended in acrimony after Moscow refused to support deeper oil cuts to reduce a glut and support prices that have swooned during the coronavirus outbreak. OPEC responded by removing all limits on its own production.
“This could be the end of the OPEC-Russia alliance,” said Phil Flynn, an analyst at Price Futures Group in Chicago. “For the first time in years at the end of March, there could be no quota on OPEC producers.”
The split between OPEC and Russia recalled a 2014 oil price crash, when Saudi Arabia and Russia fought for market share with U.S. shale oil producers, which have never participated in output-limiting pacts.
Brent futures fell $4.08, or 8.2%, to $45.91 a barrel by 12:22 p.m. EST (1722 GMT), while U.S. West Texas Intermediate crude fell $3.80, or 8.3%, to $42.10 per barrel.
During the session, Brent dropped to $45.28 a barrel, its lowest since June 2017, and WTI to $41.77, its weakest since August 2016.
Both Brent and WTI were on track for their biggest daily percentage declines since 2015, putting both contracts down over 30% so far this year.
Brent’s premium over WTI has fallen more than 40% over the past two weeks to just $3.28 per barrel, its lowest since March 2018.
The number of people infected with coronavirus across the world surpassed 100,000 as the outbreak reached more countries and the economic damage intensified. Business districts began to empty and stock markets tumbled. <MKTS/GLOB>
OPEC was pushing for an additional 1.5 million barrels per day (bpd) of cuts until the end of 2020.
Non-OPEC states were expected to contribute 500,000 bpd to the overall extra cut, OPEC ministers said. The new deal would have meant OPEC+ production curbs amounting to a total of 3.6 million bpd, or about 3.6% of global supply.
“The deal is dead,” one OPEC source said. A statement by OPEC+ made no mention of cuts at all.
A source told Reuters that OPEC+ will hold a joint technical committee meeting on March 18. Analysts said they expect the group to use that meeting to figure out its next move.
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