Oil negotiators are pushing for an agreement to cut production |
[ Time:2020-04-06 | Hits:394 ] |
| Saudi Arabia, Russia and other big oil producers are racing to negotiate a deal to stem a historic plunge in oil prices. Some diplomats said progress had been made on Sunday. However, the talks still face significant obstacles: meetings of OPEC+ and other producers have already been postponed once and are tentatively scheduled for Thursday. Russia and Saudi Arabia want the United States to join, but U.S. President Donald trump has so far shown little willingness to do so. Oil diplomats are trying to broker a meeting of the g-20 energy ministers on Friday as part of an effort to involve the United States, two people familiar with the matter said. Crude oil prices have fallen 50% this year as the economic impact of a novel coronavirus pandemic has cut global demand by about a third. The price collapse has been so sharp that it threatens the stability of oil-dependent countries, the existence of us shale oil producers and poses additional challenges for central Banks. Even the international energy agency, which represents oil consumers, is calling for action. Oil officials know that without an orderly supply reduction agreement, the market will force producers to scale back production as storage runs out. "We are seeing a huge oversupply in the oil market," IEA chief Fatih Birol said in an interview on Sunday. "There is a need to put the g-20 in the driver's seat under its current Saudi presidency." Mr Trump last week revealed for the first time the talks aimed at cutting oil production by about 10 per cent, which would be the largest co-ordinated cut in history. Crude initially rose on Mr Trump's comments, but gave up gains as diplomatic complexities became apparent. Brent crude fell 4% to $32.60 a barrel in Asian trading on Monday. Even a deal to reduce output by about 10m b/d would do little to ease the glut, estimated at 35m b/d. In some corners of the physical market, prices have turned negative, and traders are moving oil offshore to tankers at record rates. Both Saudi Arabia and Russia say they want the United States, which has become the world's largest oil producer because of the shale oil revolution, to join in. But Mr. Trump lashed out at OPEC on Saturday and threatened to impose tariffs on foreign oil, though he said at a news conference Sunday night that he did not expect tariffs to be needed. The g-20 may be a more acceptable forum for the United States than OPEC. "If the americans do not participate, the old problem for Russia and Saudi Arabia will remain, which is that they are cutting production while the United States is increasing production, which makes the whole thing impossible," said Fyodor Lukyanov, head of the foreign and defense policy committee. The group advises the kremlin. It is not clear whether Russia and Saudi Arabia will demand a public commitment from the us to cut output - a challenge for the fragmented us private sector - or whether the gesture of compromise will be enough. Alexander Dynkin, director of the institute of world economics and international relations, a Russian state-run think tank, says Moscow wants the United States to lift some sanctions as a compromise. |