By Ahmad Ghaddar and Shadia Nasralla
VIENNA (Reuters) - A panel of OPEC and its allies recommended cutting oil output by an extra 1 million barrels per day (bpd) on Tuesday signaling that Russia and Saudi Arabia were moving closer to a deal to prop up prices which have been hit by the coronavirus outbreak.
Saudi Arabia and some other OPEC members have been pushing for deeper cuts as crude prices have plunged 20% since the start of the year but had struggled to persuade Russia to support the additional reduction.
The Organization of the Petroleum Exporting Countries, Russia and other producers already have a deal in place to cut output from Jan. 1 by 2.1 million bpd, a figure that includes additional voluntary cuts by Saudi Arabia.
But that has not been enough to counter the impact of the virus on China, the world's biggest oil importer, and on the global economy, as factories are disrupted, fewer people travel and other business slows, curbing oil demand.
To try to halt the spread of the virus, other international conferences around the world have been scrapped, prompting OPEC officials to consider whether their talks should be held in person or by video.
On Tuesday, the group said the number of delegates attending would be limited and journalists, who usually chase ministers, would be barred from OPEC's Vienna headquarters.
"It will be difficult diplomatically. Ministers shake hands, hug, kiss (on cheeks). What will we do?" one delegate said.
Before this week's meeting, sources said Saudi Arabia and some others producers had proposed extending the existing pact beyond its March expiry until the end of 2020 while also cutting another 1 million bpd of output only for the second quarter.
Russia, which has indicated support for an extension, has yet to swing behind the proposal for deeper cuts, even though oil prices have tumbled to about $51 a barrel <LCOc1>.
At that level, many OPEC states will struggle to balance their budgets, although President Vladimir Putin has said that the current price was acceptable to Moscow.
'SUBSTANTIAL CUT'
A cut in U.S. interest rates on Tuesday offered only limited support for crude ahead of the OPEC meeting on Thursday and the wider OPEC+ meeting on Friday.
An OPEC+ panel, the Joint Technical Committee (JTC), meeting on Tuesday before oil ministers gather, effectively backed the Saudi proposal, according to a text of recommendation.
Russia is also a member of JTC, suggesting Moscow might also be leaning toward larger cuts.
Last month, the committee recommended a smaller 600,000 bpd cut but on Tuesday it said it supported an extra cut of up to 1 million bpd.
"We will discuss the possibility of a new substantial cut by withdrawing from the market the quantities that are not consumed due to the coronavirus (outbreak)," Algerian Oil Minister President Mohamed Arkab said before heading to Vienna.
"The trend is toward the continuation of the cuts adopted in December 2019. We already have a consensus between OPEC and non-OPEC, including Russia, on this point," Arkab, who is also the current OPEC president, told state news agency APS.
A committee comprising a handful of OPEC and non-OPEC ministers, convenes on Wednesday at 1130 GMT, part of the process of drawing up recommendations for the wider gathering.
Under the existing pact, OPEC and its allies agreed at the end of last year to cut 1.7 million bpd from the market while Saudi Arabia, OPEC's biggest producer, made voluntary additional cuts of 400,000 bpd.
Offering some encouragement to those seeking to win over Moscow to further reductions, the vice-president of major Russian oil producer Lukoil <LKOH.MM>, Leonid Fedun, said the proposal to cut up to 1 million bpd would be enough to balance the oil market and lift prices to $60 a barrel.
"We are ready to cut as much as we are told to. Better to sell less oil but at a higher price," Fedun told Reuters.
(Additional reporting by Rania El Gamal, Olesya Astakhova and Alex Lawler in Vienna, Vladimir Soldatkin in Brussels and Hamid Ould Ahmed in Algiers; Writing by Edmund Blair; Editing by David Goodman and Dmitry Zhdannikov)
