WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange traded lower at the open in choppy trade early Thursday after members of Organization of the Exporting Countries announced larger-than-expected production cuts to last through the second quarter with the upside limited by reports that Russia's participation in the new agreement is conditional.
OPEC agreed to cut collective output by an additional 1.5 million barrels per day (bpd) in the second quarter of 2020 as the cartel seeks to balance the market against coronavirus-induced slump in global oil demand. Under the new agreement, OPEC members will share 1 million bpd in production cuts, with 10 non-OPEC producers led by Russia shouldering the additional 500,000 bpd. The proposed cuts will come on top of exiting 1.7 million bpd agreement finalized in December and Saudi Arabia's volunteered curbs of 400,000 bpd. Furthermore, OPEC recommended production levels agreed to in December to last through the end of 2020 as an extraordinary measure to balance the market.
"... we now convene at a time when the outbreak of COVID-19 has had a pronounced adverse impact on economic and oil demand forecasts in 2020, particularly in the first and second quarters" said OPEC's President and Algeria Minister of Energy HE Monhamed Arkab during his address to the press.
Still, oil traders remained unconvinced over Russia's consent to the OPEC+ new supply targets. Reports indicate Moscow agrees on cuts in principal, but not on the exact numbers. Energy Minister Alexander Novak will not be back at negotiating table until Friday, when OPEC producers are set to finalize the deal with non-OPEC producers. Novak made no public statements during his trip this week to Vienna. The situation remains fluid.
At 9:05 a.m ET, April West Texas Intermediate near $0.10 lower at $46.67 per barrel (bbl) and the ICE May Brent contract decline about 25 cents to $50.86 bbl. NYMEX April RBOB futures traded little changed at $1.5552 gallon while April ULSD futures shed over a penny to $1.5226 gallon.
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