Oil prices slid more than 3% on Friday after Reuters reported that Russia will not agree to steeper oil output cuts by OPEC and its allies to support prices in the face of a slump in oil demand because of the global coronavirus outbreak.
Brent and WTI crude futures tumbled by nearly $3 a barrel after the report. By 1057 GMT Brent crude was down $1.74, or 3.4%, at $48.25 a barrel. U.S. West Texas Intermediate (WTI) was down $1.56, or 3.4%, at $44.34.
A Russian high-level source told Reuters on Friday that Moscow would not back an OPEC call for extra reductions in oil output and would agree only to an extension of existing cuts by OPEC and its allies, a group known as OPEC+.
Timothy Ash, senior emerging markets strategist at Bluebay Asset Management, said in a research note that Russian President Vladimir Putin "likely wants to take this to the brink, to maximise his own geopolitical leverage to get OPEC Middle Eastern countries coming to him begging to agree to cuts."
"I guess then he will ask for concessions elsewhere, e.g. Gulf financing for Syria reconstruction," Ash said.
The Organization of the Petroleum Exporting Countries (OPEC) held talks with its allies on Friday after the group told Russia and others that it favored an additional 1.5 million barrels per day (bpd) of cuts until the end of 2020.
Non-OPEC states were expected to contribute 500,000 bpd to the overall extra cut, OPEC ministers said. The new deal would mean OPEC+ production curbs amounting to a total of 3.6 million bpd, or about 3.6% of global supply.
Some analysts had expected Moscow to endorse the agreement. Global stock markets tumbled on Friday as disruptions to business from the spreading coronavirus epidemic worsened. European shares opened sharply lower, with travel stocks bearing the brunt.
However, after marking its worst weekly performance since the 2008 financial crisis a week ago, the MSCI All-Country World Index was up 1.7% on the week.
Even with the deeper cut, Goldman Sachs said the OPEC+ deal would not have prevented a global oil market surplus in the second quarter. The bank maintained its Brent price forecast at $45 a barrel in April.
"Ultimately a rebound in demand, not supply cuts, will be the necessary catalyst for a sustainable rebound in prices," the bank said.
Meanwhile, ANZ said that global oil consumption could fall by 1.6 million bpd in the first half of 2020 and contract by about 300,000 bpd for the full year.
"Growth may return in H2 (second half of 2020) but is unlikely to be enough to offset the losses," the bank said.
— CNBC's Sam Meredith contributed to this report.