Saudi Arabia’s Upon of Energy Prince Abdulaziz bin Salman Al-Saud and Russia’s Energy Minister Alexander Novak are seen at the beginning of an OPEC and NON-OPEC confluence in Vienna, Austria December 6, 2019.
Leonhard Foeger | Reuters
The virtual meeting between OPEC and its allies scheduled for Monday has been put, sources familiar with the matter told CNBC, amid mounting tensions between Saudi Arabia and Russia. The joining will now “likely” be held on Thursday, sources said.
The Monday meeting was set after President Donald Trump said to CNBC on Thursday that he reckon oned Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman to announce a deal to cut production by up to 15 million barrels, and that he had oral to both countries’ leaders.
The delay is likely to hit oil prices next week following a record-setting comeback week for primitive. U.S. oil surged 25% on Thursday for its best day on record, and gained another 12% on Friday. It finished the week with a 32% stream, breaking a 5-week losing streak and posting its best weekly performance ever, back to the contract’s inception in 1983.
“It’s possibly going to crater,” Again Capital’s John Kilduff said. “There was a lot of optimism priced into oil Thursday and Friday. With this new Saudi, Russia slaver, it doesn’t look like it’s going to come together.”
Despite last week’s surge, West Texas Midway crude is still down nearly 40% in the last month on the heels of demand destruction from the coronavirus outbreak, and the charge war between Saudi Arabia and Russia.
Friday’s jump was fueled by a Reuters report that OPEC+ was contemplating a presentation cut equivalent to about 10% of world supply, and that Putin said a cut of 10 million barrels a day appeared viable.
Both Saudi Arabia and Russia have sought U.S. cooperation in balancing the world oil supply. American drillers are that time pumping near record levels as the world is coming to the edge of its ability to store oil.
U.S. oil executives met with the president Friday at the Cadaverous House, and there was speculation he would ask them to cooperate in cuts. No agreement came of the meeting, but Trump did seem to weigh an industry view that market forces should determine prices.
“These are great companies and they’ll accept it out,” he said at a White House briefing following his meeting with the energy CEOs. “It’s a free market, they’ll drift of it out.”
At its March meeting, OPEC proposed cutting production by 1.5 million barrels per day in an effort to combat the demand slowdown, but OPEC-ally Russia refused the additional cuts. The meeting ended with no agreement, and in retaliation Saudi Arabia slashed its oil prices in an effort to garner market share, and subsequently increased its production to a record high of more than 12 million barrels per day.
Tensions between Saudi Arabia and Russia have planned escalated since. In comments Friday, Putin blamed the collapse in oil prices on Saudi Arabia pulling out of the more than 3-year-old OPEC gain deal, along with its increase in production and agreements for discounts, all of which exacerbated the blow from the coronavirus.
Saudi Arabia fixed back. In a statement Saturday, Saudi Foreign Minister Prince Faisal bin Farhan reportedly said Putin’s animadversions were “devoid of truth.”
Saudi Arabia energy minister Prince Abdulaziz bin Salman also issued a averral Saturday saying comments from Russia’s energy minister Alexander Novak “were categorically false and opposite to fact.” The statement said the Saudi minister “expressed his surprise at the attempts to bring Saudi Arabia into oppositions against the shale oil industry.” The minister noted that Saudi Arabia was a major investor in the U.S. oil sector.
“Now we have two emanations,” said Helima Croft, head of global commodities research at RBC. “After President Trump’s statement it seems more readily unlikely any production commitment is forthcoming. And it looks like we might have a new diplomatic rift between Russia and the Saudis…The Saudi parson is pushing back furiously on the Russian minister’s assertion that the Saudis are targeting shale.”
The U.S. oil industry is divided on whether it could or should provide to production cuts in an effort to stabilize prices.
The American Petroleum Industry opposes cuts, saying such a pull up stakes would harm the U.S. industry. In Texas, however, Ryan Sitton, one of the three members of the Texas Railroad Commission, has express that the state would consider participating in such a deal.
OPEC has invited the Texas commission to participate in its June assembly, and Sitton said on Thursday that he spoke to Russian energy minister Alexander Novak about production reduces.
Oil producing states, like Texas, have the authority to manage production, though the federal government cannot head production and a consortium of companies cooperating would be seen as an anti-trust violation. The Texas commission last restricted produce in 1970. It has set a meeting set for April 14.
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