Saudis Weigh Large Oil Cuts in Response to Coronavirus

Saudis Weigh Large Oil Cuts in Response to Coronavirus

Saudi Arabia is pushing for a major, short-term oil production cut as it seeks to respond to the impact of China’s deadly coronavirus on crude demand, according to OPEC officials.

Representatives of the Organization of the Petroleum Exporting Countries and its allies are set to meet Tuesday and Wednesday to debate possible action after the outbreak in China, the world’s largest oil consumer, led to the biggest monthly crude-price drop in 30 years.

Under one scenario, Saudi Arabia, OPEC’s kingpin, would lead a collective reduction of 500,000 barrels a day that would stand until the crisis is over, cartel officials said.

Another option being considered would involve a temporary cut of 1 million barrels a day by the Saudis to jolt oil markets, the officials said.

OPEC and its allies are split over how to manage oil supply in the face of the deadly coronavirus, which has already eroded demand in China. Collective responses by oil producers tend to be more efficient in supporting crude prices, which have lost 15% in the past month.

Despite the Saudi prodding, the cartel and 10 allied nations led by Russia stopped short of scheduling an emergency meeting of its full delegation this week and will instead hold a technical meeting to access the virus’s impact and make recommendations to members.

Producers would then decide if they hold a small gathering led by Saudi Arabia and Russia—called a Joint Ministerial Monitoring Committee—or a summit of all 23 producers in Vienna, the officials said.

Oil prices ticked higher on The Wall Street Journal’s report. Brent-crude futures were 0.2% higher on the day at $56.71 a barrel, while West Texas Intermediate futures were up 0.7% at $51.92 a barrel.