World Oil Leaders Consider Cuts
April 7th, 2020
There are a lot of headline and reports about OPEC members and other talking a good story about working together to stabilize prices. Saudi Arabia and Russia are both saying they will not participate unless the US does as well. The US’s part in this is tricky and it will be interesting to see if and how the US is part of a cut. Some think that individual states may make some kind of mandate for production. Of course, the Texas Railroad Commission, which oversee oil in the state, has garnered some headlines lately with regard to production cuts and they are set to have a meeting later this week.
A Russian top oil negotiator, who also heads Russian’s sovereign wealth fund, Kirill Dmitriev, said
Saudi Arabia and Russia are close to a deal on oil output cuts to reduce a global glut. He said Russia is ready to coordinate with other leading oil exporting countries to help to stabilize the global oil market. He also stated that Russia is working closely with US authorities to have American producers participate in the output cut to bring stability in the world. Russia’s President, Vladimir Putin, has stated that the base should be production levels in the first quarter.
Meanwhile, an OPEC source said the base was “negotiable”, adding every producer faced the same threat that the world’s oil storage capacity was fast reaching a limit. After Thursday’s scheduled OPEC+ talks, G20 energy ministers and members of some other international organizations will hold a video conference, hosted by Saudi Arabia, on Friday, according to a senior Russian source.
US Energy Secretary, Dan Brouillette, said that after speaking with the Energy Ministers of Saudi
Arabia and Russia, he hoped the countries would end their war over market share this week. He said he spoke to his Saudi counterpart, Prince Abdulaziz bin Salman, and told him that Saudi-Russian battle for market share in the global oil market has “major implications” for the US and the world.
China’s purchasing managers index rose to 52 in March from a record low of 35.7 in February. This is raising hope that the world will start to recover from the coronavirus demand destruction.
Physical crude oil traders stated Friday that they expect Permian basin crude oil prices to fall by as much as another $10 by May when oil tanks in the region are seen hitting maximum capacity.
Price are trying to move higher on the hopes of a production cut. The talk is still that this will be a 10 million bpd cut which is roughly 1/3rd of the demand lost due to the virus and everyone being on lock down.
Early estimates for tomorrow’s DOE inventory report. Crude up 9.083, Gas up 4.885, Distillates up 692,000.