DUBAI/MOSCOW/WASHINGTON--U.S. President Donald Trump said on Thursday he had brokered a deal with top crude producers Russia and Saudi Arabia to cut output and arrest an oil price rout amid the global coronavirus pandemic, though details of how cuts would work were unclear.
Trump said the two nations could cut output by 10 to 15 million barrels per day (bpd) - an unprecedented amount representing 10% to 15% of global supply, and one that would require the participation of nations outside of OPEC and its allies.
A senior U.S. administration official familiar with the matter said Trump would not formally ask U.S. oil companies to contribute to the production cuts, a move forbidden by U.S. antitrust legislation.
Russia and Saudi Arabia have been at odds since early March, when they failed to agree on a deal curbing output as the coronavirus spread around the globe. The pandemic has worsened since, freezing economic activity and sending oil prices into a tailspin as producers confronted the prospect of a dramatic fall in demand along with a flood of unwanted oil supply.
"It's a very needed and necessary step - nothing works at $20 oil. Physically, the tap has to get turned off," said Brian Williams, partner at Carl Marks Advisors, a merchant banking firm.
Saudi Arabia, the de facto head of OPEC, called on Thursday for an emergency meeting of OPEC and non-OPEC oil producers, an informal grouping known as OPEC+, state media reported, saying it aimed to reach a fair agreement to stabilize oil markets. Trump is separately set to meet with U.S. oil industry executives on Friday.
Trump said he spoke with both Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman on Thursday. "I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!" Trump wrote on Twitter.
"Trump's call to Putin has changed everything," one OPEC+ source said, adding that initial talk among the group was about how other large producers such as Canada and Brazil would need to join in any coordinated output cuts.
Jason Kenney, the premier of Alberta, Canada's primary oil-producing province, said on Thursday that Alberta was open to joining a production-cut deal, though he said, "It's the Saudis and the Russians here who are the problem." Canada produces roughly 4 million barrels of oil every day.
Global oil demand is expected to fall by about 30 million bpd in April, or about one-third of daily consumption. Some 3 billion people around the world have been put on lockdown to slow the spread of coronavirus, which has sickened 1 million people worldwide and killed nearly 50,000.
The immense decline in demand sent oil prices to their lowest levels since 2002, close to $20 per barrel, hitting budgets of oil-producing nations and dealing a huge blow to the U.S. shale oil industry, which cannot compete at low prices.
