Oil

'I cannot see us not agreeing' on an OPEC+ production cut: UAE energy minister

Key Points
  • Ahead of meetings with non-OPEC allies in Vienna Friday, the UAE's Energy Minister, Suhail al-Mazrouei, appeared confident that Russia would accept the proposed production cuts.
  • "I cannot see us not agreeing because that's very important for the market and everyone is keen," he told reporters.
  • Analysts also tell CNBC why Russia is likely to accept lowering output, and explain the slide in oil despite OPEC's Thursday agreement.
VIDEO1:1001:10
Can't see OPEC unilaterally doing a deal, UAE energy minister says

Ahead of meetings with non-OPEC allies in Vienna Friday, the UAE's energy minister appeared confident that Russia would agree to proposed production cuts.

OPEC members on Thursday agreed to lower output by 1.5 million barrels a day until the end of the year in response to falling oil prices, which have been under pressure since the outbreak of the novel coronavirus.

But that proposal will need approval from the group's allies — most prominently, Russia — a non-OPEC leader.

"We are hoping. Russia is a very important member," UAE's Energy Minister Suhail al-Mazrouei told reporters, when asked about whether Moscow will accept the cuts.

"I cannot see us not agreeing because that's very important for the market and everyone is keen," he said.

The minister also added that OPEC will not act without its non-member allies. "I cannot see us, unilaterally as OPEC, doing a deal," he said. 

Why oil remains under pressure

That may be playing into the market's fears, RBC Capital Markets' Helima Croft said.

"There is a concern about what happens if Russia says no," she said, when asked why oil prices were sliding despite the alliance's agreement on Thursday.

"OPEC came out yesterday, basically put the cut on the table, but said it's all in or nothing," she told CNBC's Dan Murphy on Friday.

"I think we're likely to get a yes today, but it's certainly by no means certain," she said.

VIDEO2:5202:52
OPEC facing a 'go big or go home moment,' analyst says

Daniel Hynes, senior commodity strategist at ANZ, agreed that Russia is likely to approve the deal.

"They're certainly getting to a point now where they do need to see support in the oil price," he told CNBC's "Street Signs Asia."

He said Russia used $55 per barrel of oil in its budget calculations. Both crude futures are trading below that level. In Asia's evening, Brent was trading at $48.61, down 2.76%, while U.S. West Texas Intermediate traded at $44.73, 2.55% lower.

The market is expecting more deeper cuts ... and for longer duration of time.
Sushant Gupta
Wood Mackenzie

Hynes added that Russian President Vladimir Putin is running an "expensive spending program" at the moment. 

"There will be pressure, domestically, to deliver into that, and I think that will probably lead him towards at least agreeing," he said.

However, even if OPEC and its allies cut production by 1.5 million barrels a day, the market may still be oversupplied, said Sushant Gupta, a research director at Wood Mackenzie. 

"This is the bare minimum which is required to put some floor to the oil prices," he told "Capital Connection" on Friday. The firm sees oil demand declining by 2.7 million barrels a day in the first quarter of the year.

"The market is expecting more deeper cuts ... and for longer duration of time."

— CNBC's Sam Meredith contributed to this report.