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, OPEC officials said,
as the demand for crude plummets amid the coronavirus pandemic.
U.S. oil companies are divided over the proposed cooperation
between the world's three biggest crude-producing nations, which
would be unprecedented. Some major oil companies, including Exxon
Mobil Corp. and Chevron Corp., are opposed to the plan. Some
American shale producers, including Pioneer Natural Resources
Corp., 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. Oil prices jumped by double-digit percentages a
second straight day on hopes of a detente in the global price
war.
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
Friday on oil production cuts.
While the U.S. government and some companies cannot formally
join the 23-nation Saudi-and-Russia-led alliance because of
antitrust 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.
Mr. Trump'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 14% to $34.11 a
barrel on Friday. West Texas Intermediate futures, the U.S.
bellwether, gained 12% to $28.34 a barrel. Still, both price gauges
have lost about half their value since the start of the year.
The drop has prompted U.S. producers to slash drilling budgets
and idle rigs. The number of rigs drilling domestically fell to 664
Friday, down from 770 a month ago, according to Baker Hughes
Co.
Yet it could be months before the slowdown results in diminished
output. U.S. crude production has held near a record level of 13
million barrels a day through March 27.
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 major oil companies 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 of 10 million barrels a day would be needed to
balance the market.
"We are all concerned about the way the situation is developing,
everyone is interested in joint and -- I'd like to stress it --
coordinated actions to ensure long-term market stability," Mr.
Putin said during a video meeting with Russian oil officials.
Vagit Alekperov, the head of Russian oil major Lukoil, said that
it wasn't clear by how much Russia would cut production as the
situation "changes every day."
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
how much fuel demand the pandemic has erased. Goldman Sachs, for
instance, estimates oil demand this week fell by 26 million barrels
a day -- or a quarter of global demand.
"The benefits from a likely modest reduction in global crude oil
supply are still likely to be swamped by the decline in crude oil
demand," said CFRA Research analyst Stewart Glickman.
--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 16:03 ET (20:03 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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