Opec+ talks on oil cuts continue, but US is still non-committal

Not enough

“I’m not sure how Russia and Saudi Arabia would be able to iron out their differences today, it all could be stretched out,” one Russian source said, a sentiment echoed by two Opec sources.

Two Russian sources said the maximum Russian cut would be 2-million bpd or about 17% of its output. Saudi Arabia has yet to indicate how much it is prepared to cut.

Goldman Sachs and UBS both said on Thursday that the suggested cuts, however deep, would not be enough to address a huge decline in global demand and predicted that oil prices could fall back to $20 a barrel or even lower. “Ultimately, the size of the demand shock is simply too large for a co-ordinated supply cut,” Goldman said in a note.

Trump said on Wednesday that he has many options if Saudi Arabia and Russia fail to reach a deal on Thursday.

US senators have previously called on the White House to impose sanctions on Riyadh, pull out US troops from the kingdom and impose import tariffs on Saudi oil.

Thursday’s Opec+ talks will be followed by a meeting of energy ministers from the G20 on Friday.

To figure out how a cut would be shared among producers, Moscow, Riyadh and others would need to agree on what output levels to use as a baseline for calculating cuts. That issue has been muddied by a battle between Saudi Arabia and Russia for market share that erupted after an acrimonious Opec+ meeting in Vienna in March.

At that meeting, Russia refused to participate in cuts proposed by Saudi Arabia in response to the coronavirus crisis. In response, Riyadh said it would pump at maximum capacity and flooded an already oversupplied market with extra crude.

Saudi Arabia ramped up output to a record 12.3-million bpd in April, up from less than 10-million bpd in March. The kingdom’s Gulf allies, Kuwait and the United Arab Emirates, also raised production.

Russian TASS news agency has said that any cuts could last three months, starting from May. The largest one-off cut Opec has ever agreed was 2.2-million bpd in 2008.

Reuters