Russia, Saudi 'very close' to oil deal, says Moscow negotiator

Daniel Fowler
April 7, 2020

Earlier in March, Saudi Arabia declared an oil price war after Moscow rejected plans to cut crude oil production by a combined volume of about 1.5 million barrels per day, to stop further reduction in global oil price.

OPEC and its allies postponed an emergency meeting, led by Saudi Arabia, where the oil cuts could be agreed upon.

The meeting was moved to Thursday. "There was a lot of optimism priced into oil Thursday and Friday".

USA crude recently fell 7.3% to $26.27 per barrel and Brent was at $33.13, down 2.87% on the day. West Texas Intermediate crude CLc1 fell 41 cents, or 1.5 percent, to $27.93 a barrel, off a session low of $25.28.

That was a change in tone from Friday, when he suggested he wasn't inclined to target Russian Federation or Saudi Arabia with oil tariffs.

Last week, President Donald Trump said to CNBC that he expected 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 spoken to both countries' leaders. "If they don't get along, I would do that, yeah, I would do tariffs, very substantial tariffs".

"If I have to do tariffs on oil coming from outside or if I have to do something to protect our. tens of thousands of energy workers and our great companies that produce all these jobs, I'll do whatever I have to do", Trump told reporters during a briefing about the coronavirus outbreak.

That has been a major problem for the economy of the United States, which has grown into the world's largest oil and gas producer, because it has threatened the once-bustling drilling industry with layoffs and bankruptcies. The White House has not suggested it would try to persuade producers to reduce output. Saudi Aramco typically issues its OSPs by the fifth of each month, setting the trend for Iranian, Kuwaiti and Iraqi prices and affecting more than 12 million barrels of oil per day bound for Asia.

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"That's a pretty clear sign that they are open to cutting in May", said Robert McNally, president of Rapidan Energy Group in Bethesda, Maryland.

The OPEC+ meeting was initially due to take place on Monday, but was postponed to April 9 "to allow for more time to reach out to all producers including OPEC+ and others", the Saudi source said.

Oil gave up some of last week's rally after a delay to a planned meeting of top producers to discuss output curbs and signs the U.S. won't join any deal raised doubts over the prospects for an agreement. "We are doing what we can to make it successful, including taking this extraordinary step to delay the OSPs", the Saudi source said.

The kingdom's aggressive price cuts in early March shocked the oil industry, kicking off a downward spiral in the oil market that accelerated with the worsening of the coronavirus pandemic.

Over the weekend, the dispute between Moscow and Saudi Arabia over who is to blame for plunging crude prices intensified.

The countries are "very, very close" to a deal on cuts, Russia's sovereign wealth fund chief told CNBC.

Coordinated cuts between OPEC+ members expired on March 31, having helped support crude prices since they began in January 2017.

"If the Americans don't take part, the problem that existed before for the Russians and Saudis will remain - that they cut output while the United States ramps it up, and that makes the whole thing impossible", said Fyodor Lukyanov, head of the Council on Foreign and Defence Policy, a research group that advises the Kremlin.

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