Saudi Arabia, Russia and other large oil producers are racing to negotiate a deal to stem a historic price crash as diplomats said some progress was made on Sunday.
The talks still face significant obstacles: a meeting of producers from OPEC+ and beyond — delayed once — is only tentatively scheduled for Thursday.
Russia and Saudi Arabia want the US to join in, but US President Donald Trump has so far shown little willingness to do so.
Photo: Reuters
Oil diplomats are trying to stitch together a meeting of G20 energy ministers for Friday, part of an effort to bring the US on board, according to two people familiar with the situation.
Even the International Energy Agency (IEA), which represents industrialized energy-consuming nations, is calling for action.
“We see a huge oversupply in the oil market,” IEA executive director Fatih Birol said in an interview on Sunday. “There’s a need for the G20 in the driving seat, led by its current chair, Saudi Arabia.”
Crude prices have fallen 50 percent this year, as the economic effects of the COVID-19 pandemic have knocked out about a third of global demand.
The price crash is so dramatic that it is threatening the stability of oil-dependent nations, the existence of US shale producers and poses an extra challenge to central banks.
Industry officials say that if a deal to cut supply in an orderly way is not reached, the market will simply force producers to slash output as storage space runs out.
The aim of talks, first revealed by Trump last week, is to cut oil production by about 10 percent — the biggest ever coordinated reduction.
Russia and Saudi Arabia are “very, very close” to reaching a deal on oil-production cuts, Russian Direct Investment Fund Chief Executive Kirill Dmitriev said in an interview with CNBC.
The US is encouraging the Saudi Arabians to convene a meeting of G20 energy ministers, and expects it to happen toward the end of the week, US Secretary of Energy Dan Brouillette said in an interview with Fox Business.
However, even if a deal is struck for as much as 10 million barrels per day, that would barely dent the supply glut, which is estimated at as much as 35 million barrels a day.
In some corners of the physical market prices have already turned negative.
Saudi Arabia and Russia both say they want the US, which has become the world’s largest producer thanks to its shale revolution, to join the cuts.
However, Trump had only hostile words for OPEC on Saturday, threatening tariffs on foreign oil, though at a briefing late on Sunday he said he did not expect he would have to use them.
“If the Americans don’t take part, the problem which existed before for the Russians and Saudis will remain — that they cut output while the US ramps it up, and that makes the whole thing impossible,” said Fyodor Lukyanov, head of the Council on Foreign and Defense Policy, a research group that advises the Kremlin.
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