Factories have been disrupted, people have been deterred from travelling and other business activity has slowed, shrinking demand for fuel.
Saudi Arabia has been pushing OPEC
and its allies, including Russia, for a big cut up to 1.5 million bpd for the second quarter of 2020, alongside extending existing cuts of 2.1 million bpd, which expire this month, to the end of 2020.
Riyadh, OPEC's biggest producer, has struggled to win over Moscow. Russian Finance Minister Anton Siluanov said on Thursday he was ready for a drop in oil prices if there was no deal.
Kazakh Energy Minister Nurlan Nogayev, another non-OPEC
producer, said talks were only focusing on extending existing curbs to June.
"Moscow perhaps is underestimating that Saudi Arabia may be ready to walk away if it doesn't get a positive answer," said Amrita Sen, co-founder of Energy Aspects think-tank.
In an unusual development, OPEC members gathered for another informal meeting late on Thursday and two sources said OPEC would likely recommend that the additional oil cuts of 1.5 million bpd run until the end of 2020, not just until June.
Russia, which joins OPEC+ talks on Friday in Vienna, has been hesitant in the past in the build up to meetings but has agreed at the last minute.
But OPEC sources have said negotiations with Russia
this time have been tougher. Two OPEC sources said on Thursday that, if Russia failed to sign up, there was a risk Saudi Arabia would insist on scrapping OPEC production limits altogether.
But OPEC Secretary General Mohammad Barkindo sought to play down concerns that cooperation with Russia would falter.
"We have no reason to doubt the continued commitment of the Russian Federation to this partnership," he said after OPEC ministers held informal talks at a Vienna hotel.
After its formal ministerial meeting, OPEC said the coronavirus outbreak created an "unprecedented situation" with risks "skewed to the downside", adding that action was needed.
It said ministers had agreed non-OPEC states were expected to contribute 500,000 bpd to the overall extra cut. The group said the existing supply curbs should last to the end of 2020.
Worst Case Scenario
Suhail al-Mazroui, energy minister of the United Arab Emirates, said OPEC would not carry the burden of cuts alone and non-OPEC states had to join in. "We are all in this together. So it's not going to be us making a decision alone," he said.
Saudi Arabia, the world's top oil exporter, is already cutting well beyond its quota under the existing pact, reducing its output by about 10 per cent. Russia, with bigger total production, has reduced its output by a fraction of Riyadh's cut.
Gary Ross, founder of Black Gold Investors, said a worst case scenario in which Saudi Arabia returned to full production would send oil prices down to $25 to $30 a barrel.
That would take prices to a level that would be painful for OPEC states, already struggling with prices at around $50, and also Russia, which has said it can balance its books at $40.
"OPEC+ have little choice but to cut output substantially given the virus related demand losses," Ross said, adding that he expected Russia "will join because it is overwhelmingly in their economic interests."
Brent oil prices rose 0.6 per cent on news of OPEC's plan to cut but gave up most of those gains when Russia and others suggested a deal was not in the bag.
The proposed OPEC cut of 1.5 million bpd, if approved, would be well above what the market had expected up until this week. It would bring the group's overall output reduction to 3.6 million bpd or about 3.6 per cent of global supplies.
The last time OPEC reduced supplies on such a scale was in 2008 when it cut production by a total of 4.2 million bpd to address slower demand because of the global financial crisis.
OPEC hold its next ministerial meeting on June 9.
Oil prices edged lower on Thursday as the coronavirus epidemic showed no signs of slowing, with deaths mounting globally, but losses were limited as major producers agreed on deeper output cuts to bolster prices.
Still, analysts and traders said global oil markets
are likely to be oversupplied in the second quarter.
Brent crude fell by 34 cents, or 0.7 per cent, to $50.79 a barrel by 11:52 a.m. ET (16:52 GMT.) US West Texas Intermediate (WTI) was down 17 cents, or 0.4 per cent, at $46.61.