Vienna (AFP)

OPEC wanted to cut drastically in oil production, Russia said no: the absence of agreement between the two allies on Friday is a "psychological blow" to the markets and may increase the price collapse caused by the coronavirus .

The meeting between the Organization of the Petroleum Exporting Countries (OPEC) and their allies gathered around Moscow turned into a psychodrama in Austria after the failure of the Russians and the Saudis to find common ground to face the consequences of the global epidemic.

At the end of a day of talks, the Russian Minister of Energy Alexandre Novak announced a return to everyone for himself: there will no longer be any obligation, from April 1, to continue to observe the strict quotas that the 23 producing countries of OPEC + had set since 2017, according to Mr. Novak.

This rebound further plunged oil prices. The WTI, the benchmark barrel in the United States, for delivery in April, plunged 10.1% to 41.28 dollars, a level more seen since April 2016.

A barrel of Brent North Sea crude for May delivery tumbled 9.4% to $ 45.27 in London, its lowest closing price in nearly four years.

- Continuation of consultations -

On Thursday, the 13 member countries of OPEC had offered to support the bulk of an additional collective cut of 1.5 million barrels per day from next month and until the end of 2020 .

But Russia, leader of the 10 partners of the cartel, freed itself from this alliance by refusing to assume the third of the cuts (500,000 barrels) which was reserved for it.

The representatives of the 23 oil-producing countries left OPEC headquarters dispersed, their faces closed, canceling a press conference scheduled after their discussions. "There is no agreement, and there is no plan B either," said one of the few delegates to speak to the media.

OPEC's Nigerian secretary general, Mohammed Barkindo, tried to look good, refusing to act to end the Opep + alliance and assuring the press that "consultations are continuing this evening". The next cycle of ministerial meetings remains scheduled for June in Vienna.

In the medium term, low prices are likely to weigh heavily on the budgets of the petro-monarchies of the Gulf and could also durably call into question the marriage of reason sealed by OPEC and its allies in an attempt to weigh on prices.

The lack of agreement is a "psychological blow" to the market, said Ann-Louise Hittle, analyst at Wood Mackenzie, who also stressed the risk of "a frantic production" of black gold in the month of April when the supply is already oversupply.

- American competition -

Since 2017, OPEC + members have set strict production quotas by withdrawing 1.2 million barrels per day from the market. Last December, the alliance had increased this reduction by 500,000 barrels while Saudi Arabia withdrew, individually, 400,000 more.

A further drastic adjustment still seemed necessary in order not to let the epidemic ruin these painful efforts: oil revenues were hit hard by the brake on the Chinese economy, the world's largest importer of black gold.

But Russia, the world's second largest producer of crude after the United States and ahead of Saudi Arabia, based its budget forecasts on a barrel of Brent at 42.4 dollars and repeats being satisfied with current prices.

For the Russian oil majors, any barrel withdrawn from the market implies a fall in financial revenues and the risk of yielding market shares in the United States, which floods the planet with their shale oil.

"The Russians can live on a barrel of 40 dollars and it seems that they are ready to support even lower prices in the short term," observes Edward Moya, analyst at Oanda.

According to Matt Weller, of Gain Capital, "Russia has no doubt also said that if the fall in prices lasted for weeks, even months, it would suffer less quickly than American producers".

© 2020 AFP