* OPEC had pushed for bigger-than-expected curbs
* Russia had long been reluctant to back more cuts
* Deal failure threatens OPEC+ alliance
* Already weak oil prices plunge 10%
(Adds JP Morgan comment on shale producers)
By Rania El Gamal, Alex Lawler and Olesya Astakhova
VIENNA, March 6 (Reuters) - A three-year pact between OPEC
and Russia ended in acrimony on Friday after Moscow refused to
support deeper oil cuts to cope with the outbreak of coronavirus
and OPEC responded by removing all limits on its own production.
Oil prices plunged 10% as the development revived fears of a
2014 price crash, when Saudi Arabia and Russia fought for market
share with U.S. shale oil producers, which have never
participated in output limiting pacts.
Brent has lost about a third of its value this year,
tumbling towards $45 a barrel, its lowest since 2017, putting
oil-dependent nations and many oil firms under heavy strain as
the global economy reels due to the virus outbreak, which has
dampened business activity and stopped people travelling.
"From April 1 neither OPEC nor non-OPEC have restrictions,"
Russian Energy Minister Alexander Novak told reporters after
marathon talks at the OPEC headquarters in Vienna on Friday.
Saudi Energy Minister Prince Abdulaziz bin Salman told
reporters when asked whether the kingdom had plans to increase
production: "I will keep you wondering".
The failure of talks may have more far reaching implications
as OPEC's de facto leader Saudi Arabia and Russia have used oil
talks to build a broader political partnership in the last few
years after effectively supporting opposite sides in the Syrian
war.
"Russia's refusal to support emergency supply cuts would
effectively and fatally undermine OPEC+'s ability to play the
role of oil price stabilising swing producer," said Bob McNally,
founder of Rapidan Energy Group.
"It will gravely rupture the budding Russian-Saudi financial
and political rapprochement. The result will be higher oil price
volatility and geopolitical volatility," he said.
SHALE SLOWDOWN
Beyond Moscow and Riyadh's ties, plunging oil prices will
put pressure on U.S. shale producers, whose output costs are
much higher than those of Russian and Saudi production, even
though many shale producers are well hedged against price falls.
"This crisis has revealed that Saudi is not willing to keep
a floor under shale and other producers. They are expediting the
slowdown on shale," said Christyan Malek, head of JP Morgan oil
and gas research for Europe, Middle East and Africa.
The OPEC+ talks collapsed after OPEC effectively presented
Russia with an ultimatum on Thursday, offering it a choice of
accepting a deal with much bigger than expected cuts or no deal
at all.
Forecasts for 2020 demand growth have been slashed but
Moscow has long argued it was too early to assess the impact.
Sources said Novak delivered the same message on Friday.
OPEC ministers said on Thursday they backed an additional
1.5 million barrels per day (bpd) of oil cuts until the end of
2020, in addition to rolling over existing cuts of 2.1 million
bpd. That would have meant removing a total of about 3.6 million
bpd from the market, or 3.6% of global supply.
Moscow rejected the proposal on Friday, saying it was only
willing to extend existing OPEC+ cuts of 2.1 million bpd, which
were due to expire at the end of March. But in response, OPEC
even refused to extend the existing cuts.
The Kremlin said on Friday President Vladimir Putin had no
immediate plans to talk to the Saudi leadership, an announcement
that dashed hopes that a deal could be salvaged at the very top.
The collapse of the deal means OPEC members and non-OPEC
producers can in theory pump at will in an oversupplied market.
"This is an unexpected development that falls far below our
worst case scenario and will create one of the most severe oil
price crises in history," said Bjoernar Tonhaugen of Rystad
Energy.