Saudi Arabia, Russia Press U.S. to Coordinate Oil Cuts; Prices Rise -- 4th Update
04 April 2020 - 4:43AM
Dow Jones News
By Summer Said, Benoit Faucon and David Hodari
Saudi Arabia and Russia are pressing the U.S. to coordinate oil
output cuts in an attempt to stabilize prices as the demand for
crude plummets amid the coronavirus pandemic, OPEC officials
said.
U.S. oil companies are divided over the proposed cooperation
between the world's three biggest crude-producing nations, which
would be unprecedented. Some oil majors, including Exxon Mobil
Corp. and Chevron Corp., are opposed to the plan. Some American
shale producers such as Pioneer Natural Resources are trying to
find ways to join the Saudi-and-Russia-led plan.
Top executives from U.S. energy companies were expected to take
up the matter in a White House discussion convened by President
Trump on Friday.
The Saudi-led Organization of the Petroleum Exporting Countries
and 10 nations led by Russia are set to hold a virtual emergency
meeting on Monday. The group is considering whether to invite
representatives from the U.S. and Canada, including from Texas and
Alberta. The outcome of Monday's summit will largely depend on
whether Mr. Trump and U.S. oil companies can reach a consensus on
oil production cuts on Friday.
While the U.S. government and some companies cannot formally
join the 23-nation Saudi-and-Russia-led alliance because of
antirust and sovereignty issues, they are trying to figure out ways
to convince Saudi Arabia and Russia to reduce output. Riyadh and
Moscow have privately made it clear they won't cut output unless
U.S. producers do so as well.
Mr. Trump said Thursday he was hopeful that a truce could be
worked out in the oil-price war between Saudi Arabia and Russia
after he had spoken to Saudi Crown Prince Mohammed bin Salman.
Saudi Arabia, the world's largest crude exporter, slashed its
prices and said it would unleash a flood of oil last month after it
failed to reach a deal with Moscow on a response to falling demand.
The ensuing price war, along with lockdowns and travel bans amid
the pandemic, have pushed oil prices to their lowest level in 18
years.
The president's remarks on Thursday sparked a record-breaking
percentage climb in oil prices, with Brent and U.S. crude notching
gains of 21% and 25%, respectively.
Brent crude, the global benchmark rose another 15% to $34.43 a
barrel on Friday, on course to finish the week 23% higher. West
Texas Intermediate futures, the U.S. bellwether, were up 10.9% at
$28.08 a barrel, set for a weekly gain of 30%. Still, both
benchmarks have lost around half their value so far in 2020.
The Saudi-and-Russia led alliance will discuss output curbs of
10 million barrels a day, including North America, on the Monday
conference call, the officials said. It wasn't clear whether North
American producers would participate. They haven't attended OPEC
gatherings in many years.
Under that option, Saudi Arabia would reduce output by 3 million
barrels a day from current levels, a group of other Persian Gulf
countries and Russia by 1.5 million barrels a day each, these
people said. Oil producers outside the Saudi-Russian oil alliance,
in the U.S., Canada, Brazil and others, would reduce output by
about another 2 million barrels a day, they said. The rest of the
cuts would be shared between smaller producers who already belong
to the Saudi-Russian alliance.
Among those are some U.S. shale producers, who have told OPEC
they were ready to carry voluntary production cuts amid a
ballooning oil glut, said people familiar with the matter. Some of
them, in Texas, are backing the possible curtailment of 500,000
barrels a day, these people said. But oil majors are worried any
concerted curbs could expose them to risks of lawsuits on antitrust
grounds, they said.
Russian President Vladimir Putin said Friday that his country
was ready for a deal with OPEC and the U.S. He said that a
collective cut 10 million barrels a day would be needed.
The U.S. Department of Energy is also looking at ways to
convince the Saudi-and-Russia-led groups that U.S. producers can
follow through with any voluntary curbs they propose, the people
said. Many OPEC officials don't believe the U.S. producer will
voluntarily reduce production without U.S. government
intervention.
While the output reductions could help cushion the current oil
price crash, most analysts say it won't be enough to make up for
collapsing demand.
The effects of the coronavirus pandemic have prompted investment
banks and commodities traders to repeatedly slash their forecasts
for global oil demand. Goldman Sachs on Monday said oil demand this
week would fall by 26 million barrels a day -- or a quarter of
global demand.
--Georgi Kantchev contributed to this article.
Write to Summer Said at summer.said@wsj.com, Benoit Faucon at
benoit.faucon@wsj.com and David Hodari at
David.Hodari@dowjones.com
(END) Dow Jones Newswires
April 03, 2020 13:28 ET (17:28 GMT)
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