Oil prices sank 7% to multi-year lows on Friday as OPEC’s allies reportedly rejected additional production cuts proposed by OPEC on Thursday, according to a report from Reuters. There are also reportedly questions over whether the existing production cuts will be extended, Reuters said.
U.S. West Texas Intermediate crude slide $3.51, or 7.7%, to $42.39, its lowest level since July 2017. International benchmark Brent crude slid 7.5%, or $3.72, to $46.27 per barrel, its lowest level since at least July 2017.
The meeting between OPEC and its allies, known as OPEC+, is slated to take place later on Friday after talks were delayed.
On Thursday, OPEC recommended additional production cuts of 1.5 million barrels per day from the beginning of next month until the end of the year. The 14-member group scheduled a meeting on June 9 to review the policy.
The proposal was conditional on support from non-OPEC producers, including Russia. OPEC cautioned that the deal could only be applied on a pro-rata basis with core members set to cut 1 million barrels per day and non-OPEC partners expected to cut 500,000 barrels per day.
Oil has tumbled into bear market territory as the coronavirus outbreak has led to softer demand, and many on the Street expected OPEC to step in in a bid to prop up prices.
“The OPEC+ confab is devolving into the worst case scenario for the group. Last night, the best case scenario for the group was touted: a cut of 1.5 million bpd through year-end. That scheme hinged on Russian participation, however, which is not forthcoming,” Again Capital’s John Kilduff said. “The group may now end up merely extending the current production scheme, with no additional cuts, and the market is punishing them for that potential outcome,” he added.
Kilduff said that without the additional cut of at least 1 million barrels per day WTI prices could head into the upper $30s.
– CNBC’s Michael Bloom contributed reporting.