OPEC and non-OPEC allies failed on Friday to agree on how much oil production to cut amid the coronavirus outbreak, with Russia reportedly refusing to give the green light to the deepest supply cuts since the global financial crisis.
Oil prices initially slipped Friday afternoon on reports that Moscow said it wasn't prepared to approve a further reduction in production. Later, Reuters also reported that OPEC and its allies had even failed to agree on rolling over existing cuts, further weighing on crude prices. Then a statement by the oil group said it would continue discussions and made no mention of any cuts.
Russian Energy Minister Alexander Novak told reporters leaving the meetings in Vienna on Friday that it meant that members could now pump what they liked starting April 1.
"We have made this decision because no consensus has been found of how all the 24 countries should simultaneously react to the current situation. So as from April 1, we are starting to work without minding the quotas or reductions which were in place earlier but this does not mean that each country would not monitor and analyse market developments," he said.
International benchmark Brent crude skidded to $45.46 Friday afternoon, down over 8%, while U.S. West Texas Intermediate sank to $41.93, also around 8% lower. Both benchmarks were trading at lows not seen since 2017.
Brent futures have fallen more than 30% since climbing to an early January peak, with WTI down almost one-third over the period.
OPEC on Thursday 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 had 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 bpd and non-OPEC partners expected to cut 500,000 bpd.
Analysts had viewed the meeting between OPEC members and non-OPEC producers, referred to as OPEC+, as crucial.
"It is truly a go big or go home moment for this organization," Helima Croft, head of global commodities strategy at RBC, told CNBC's Dan Murphy on Friday morning. "If Russia says no today, there are real questions about the viability of the OPEC+ arrangement."
Once again, the disconnect between OPEC powerhouse Saudi Arabia and non-OPEC leader Russia is testing the strength of their three-year energy alliance.
Croft said she believes it is in both the economic and political interests of Moscow's to stay in the organization, "but a lot is up in the air right now."
"We have no reason to doubt the continued commitment of the Russian Federation to this partnership," OPEC Secretary General Mohammed Barkindo told reporters Thursday evening.
"We have repeatedly heard from the highest level of government in the Russian Federation of the commitment of the government to this partnership in the declaration of cooperation," he added.
Speaking to reporters shortly after OPEC recommended taking 1.5 million bpd off the market for the remainder of the year, Iranian Oil Minister Bijan Zanganeh conceded that the group had "no plan B" if Russia or any other non-OPEC members refused to accept the deal.
The oil producers first committed to curtailing their collective production policy in 2016 in an effort to bolster prices, with the deal coming into force in January 2017.
It was extended last December, and the alliance agreed to curb oil output by approximately 1.7 million barrels per day. Saudi Arabia then opted to cut its own production voluntarily by an additional 400,000 bpd for three months, should fellow members stick to their commitments.
— CNBC's Holly Ellyatt contributed to this report.