Oil prices slipped on Thursday. It let go of earlier gains after news said OPEC officials failed to agree on deeper production cuts amid a sharp drop in global demand growth.
US crude futures lost 0.5% and traded at $50.48 per barrel. Global benchmark Brent futures slipped 1.2% at $55.61 per barrel.
Experts from the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, proposed an additional production cut of 600,000 barrels a day to offset the hit at demand from the coronavirus outbreak.
The additional cuts will be on top of the existing cuts of 1.7 million barrels per day. This pre-existing agreement started in January and expired at the end of March.
But the group didn’t agree on the decision after they held an emergency meeting to ratify the proposal. That’s because Russia asked for more time to assess the impact of the outbreak.
Disrupted Demand Damages
The oil market is suffering from an oil demand shock after supply channels have been disrupted. Then, combining it with the extended holiday period in China and thousands of cancelled flights led to more turmoil.
According to an expert, although suppliers can control supply, the drop in demand is much more challenging to manage. That’s producers then have to cut production while receiving less for what they offer.
Another expert said a 600,000 barrel per day cut is “insufficient unless Saudi Arabia decides to cut more on its own.”
Russia is also not likely to participate, in which case Saudi would be compelled to cut more of its production.
The lack of decision dampened the initially positive mood earlier after China halved tariffs on $75 billion worth of US imports from February 14.
These tariff reductions come as the Asian country tries to diminish the economic damage brought by the novel coronavirus outbreak.
The death toll for the virus has so far reached 560.
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