Russia and Saudi Arabia struggling to reach a deal at OPEC meeting: Sources
OPEC + meeting postponed, Saudis and Russia cannot agree yet
OPEC and Russia have postponed a meeting until April 9 to discuss a reduction in oil production. Moscow and Saudi Arabia blame each other for falling oil prices.
This comes amid pressure from US President Donald Trump on the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia and its allies, a group collectively known as OPEC +. Trump wants urgent stabilization of global oil markets.
Oil prices hit an 18-year low on March 30 amid a slowdown in demand spurred on by measures to contain the coronavirus outbreak and the failure of OPEC and other Russian-led producers to extend a cut-off deal that expired on March 31..
OPEC + is working on an agreement to cut oil equivalent production by about 10% of global supply, or 10 million barrels per day, in what member states, including the United States, expect to be an unprecedented global effort.
At the same time, Washington has yet to commit itself to joining these efforts, and Russian President Vladimir Putin on Friday blamed Saudi Arabia for falling prices – which prompted a harsh reaction from Riyadh on Saturday..
«The Russian Energy Minister was the first to announce to the media that all participating countries are exempt from their obligations starting from April 1, which leads to the decision to increase production, which the countries adopted», – Saudi Arabian Energy Minister Abdulaziz bin Salman said, quoted by the state news agency SPA.
Putin, speaking Friday at a videoconference with government officials and leaders of the largest Russian oil producers, said that the impact of the coronavirus epidemic on demand was the first reason for the fall in prices..
«The second reason for the collapse in prices is the refusal of our partners from Saudi Arabia from the deal with OPEC +, an increase in their production and the published information about the willingness of our partners to even provide a discount on oil.», – said Putin.
Saudi Arabia’s foreign minister, Prince Faisal bin Farhan Al-Saud, challenged Putin’s claims, saying Russia had gotten out of control and that claims of the kingdom’s withdrawal from the OPEC + deal were groundless, state agency SPA said on Saturday..
Reuters sources at OPEC, who asked not to be named, said Monday’s emergency virtual meeting is likely to now be postponed until April 9 to give the parties more time to negotiate..
Agency sources are not pedaling a scandal between Saudi Arabia and Russia, saying that the atmosphere is still positive, although no draft agreement has yet been presented, nor agreement on details, such as a benchmark from which production could be cut..
«The first problem is that we now need to abandon the current level of production, and not return to the level before the crisis, – said one of the sources of OPEC. – The second question is the Americans, they have to play their part».
Oil has rebounded from this week’s lows of $ 20 a barrel, with Brent crude at $ 34.11 on Friday, still well below the $ 66 level at the end of 2019. Prices saw their biggest one-day gains Thursday as Trump said he expected Russia and Saudi Arabia to announce major production cuts.
The United States is not part of OPEC +, and the idea of cutting production in Washington has long been considered impossible, not least because of US antitrust laws..
However, the fall in oil prices prompted regulators in Texas, the center of US oil production, to consider regulating production for the first time in nearly 50 years..
US Energy Secretary Dan Bruillett did not mention the possibility of cuts in U.S. production on Friday with oil leaders, a source familiar with the matter told Reuters…
On Saturday, U.S. President Donald Trump focused instead on trade duties in response to falling oil prices..
«If I have to impose trade duties on oil that comes from outside, or if I have to do something to protect tens of thousands of our energy workers and our great companies involved in production, I will do what I have to», – Trump told reporters at a briefing on the outbreak of the coronavirus epidemic.
«The President told us what Plan B is – trade duties», – said Robert McNally, President of Rapidan Energy Group in Bethesda, Maryland.
Russian Energy Minister Alexander Novak told Russian state media that he understands that there are legislative restrictions on production cuts in the United States, but they still need to be flexible..
Other non-OPEC + oil producers have declared their readiness to participate in the common cause. Alberta, Canada, home to the world’s third largest oil reserves, is poised to join any potential global pact.
Norway, the largest oil and gas producer in Western Europe, said Saturday it will consider cutting oil production if a broad global deal is reached..
Mexican President Andrés Manuel López Obrador on Saturday called on Russia and Saudi Arabia to agree to end the price war soon.
On Friday, the International Energy Agency warned that a cut of 10 million barrels per day would not be enough to counter a global drop in oil demand. Even with this reduction, stocks will grow by 15 million barrels per day in the second quarter.