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People stand in front of the headquarters of the Organization of the Petroleum Exporting Countries, OPEC, in Vienna, Austria, Friday, March 6, 2020. Image Credit: AP

NEW YORK: Oil prices tanked more than 7 per cent on Friday to their lowest levels since mid-2017 after Reuters reported that Russia balked at Opec’s proposed steep production cuts to stabilise prices.

A Russian high-level source told Reuters that Moscow would not back a call for extra reductions in oil output and would agree only to an extension of existing cuts by the Organization of the Petroleum Exporting Countries and its allies, a group known as Opec+.

“If this results in Opec not going through with their own proposed 1 million bpd cuts in Q2, the result ... could be devastating. Brent could swiftly drop 15 per cent to the low $40s and WTI to the high $30s in this scenario,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.

Brent futures fell $3.71, or 7.4 per cent, to $46.31 a barrel by 10:23am. EST (1523 GMT). US West Texas Intermediate (WTI) crude fell $3.41, or 7.4 per cent, to $42.49.

Those prices were the lowest for Brent since July 2017 and for WTI since June 2017.

“What counts really is what Saudi Arabia does. If Russia joined, it will not add substantially. We need to see if Opec goes ahead all alone,” said Olivier Jakob, of the Petromatrix consultancy.

One Middle East source said Opec had no intention of pursuing deeper cuts without Russia.

Opec is pushing for an additional 1.5 million barrels per day (bpd) of cuts until the end of 2020.

Sources at the Organization of the Petroleum Exporting Countries (Opec) confirmed Russia’s position and a formal Opec+ meeting was under way after hours of delay.

An Opec+ delegate said there were “positive signs” after a separate, earlier Opec+ meeting had finished.

Non-Opec states were expected to contribute 500,000 bpd to the overall extra cut, Opec ministers said. The new deal would have meant Opec+ production curbs amounting to a total of 3.6 million bpd, or about 3.6 per cent of global supply.

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.

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.