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Opec gambles in bid to force Russia into oil cuts

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Opec ministers have taken a high-risk gamble, recommending a large production cut to offset the hit on demand caused by the coronavirus, without first overcoming Russian opposition first.

The cartel members tried to paint Moscow into a corner, warning that if Russia does not join them in reducing production by 1.5 million barrels a day, Opec would not act at all - an outcome that would almost guarantee a crash in oil prices.

If Russian oil minister Alexander Novak doesn't accept the proposal today "there will be no deal", his Iranian counterpart, Bijan Namdar Zanganeh, said yesterday.

The ultimatum is unprecedented since Saudi Arabia, Russia and nearly two dozen other nations created the Opec+ alliance in 2016 to collectively manage oil supply.

The risk for the Saudis is that if the gamble backfires, Riyadh has more to lose because it needs higher oil prices to fund its budget than Russia does.

Bloomberg

Irish Independent