Saudis, Russians End Oil-Price War With Deep Output Cut

Source: By Javier Blas, Bloomberg • Posted: Thursday, April 9, 2020

The Organization of Petroleum Exporting Countries and its allies, meeting by video conference on Thursday, now have the outline of a deal to cut production by 10 million barrels a day, delegates said. That reduction may continue for just two months, with smaller curbs lasting longer, they said.

Oil prices pared gains, trading up 1% at $33.18 a barrel as of 4:45 p.m. in London. That reflects concern that the volume of cuts being discussed equates to just a fraction of the demand loss, which some traders estimate at as much as 35 million barrels a day.

On top of the OPEC+ reduction, the alliance would seek cuts of as much as 5 million barrels a day from Group of 20 countries, the delegates said. It’s not clear whether the OPEC+ curbs are dependent on a G-20 contribution.

Cuts from the G-20, whose energy ministers are set to hold talks on Friday, are crucial to reviving prices that have sunk to an 18-year low. Russia has insisted that the U.S. in particular do more than just let market forces reduce its record production. President Donald Trump, meanwhile, has said America’s cut will happen “automatically” as low prices put the shale patch in dire straits.

If OPEC+, the U.S. and other producers can cement an agreement at the G-20 meeting, the curbs would dwarf any previous market interventions. That’s something that the physical market for crude — trade in actual cargoes rather than futures contracts — needs immediately, but it won’t match losses from the unprecedented slump in demand.

— With assistance by Grant Smith