Saudi Arabia, Russia and other large oil producers are negotiating for a deal to stem the historic price rout, even as leaders trade barbs in public.
“President Putin and the Russian side in general are keen to engage in constructive negotiations, which is the only way to stabilize the international energy market,” Kremlin spokesman Dmitry Peskov said in a pre-recorded interview aired on state TV on Sunday.
The talks still face significant obstacles: a meeting of producers from OPEC+ and beyond -- delayed from Monday -- is only tentatively scheduled for Thursday as negotiators race against the clock. The aim, first revealed by President Donald Trump, is to cut oil production by about 10% -- the biggest ever coordinated output reduction.
Saudi Arabia and Russia both want the U.S., which has become the world’s largest producer thanks to the shale revolution, to join the round of output cuts. But Trump had only hostile words for OPEC on Saturday, and threatened tariffs on foreign oil.
Russia and Saudi Arabia have also disagreed so far about how they would calculate the cuts, according to a person familiar with the talks. The two countries sparred publicly over the weekend.
Oil has fallen 50% this year, as the economic effects of the pandemic have knocked out about a third of global demand. The price crash is so dramatic that it’s threatening the budgets and political stability of oil-dependent nations, the existence of U.S. shale producers, and jobs in an industry already in turmoil. Even the International Energy Agency, which represents nations that consume oil, is calling for action.
Oil-producing countries know that either they reach a diplomatic accord to cut, or the market will force production shut-downs on them, as storage both on land and at sea fills up.
There were also signs of progress: Norway, which hasn’t joined any production cuts since 2002, signalled over the weekend it was ready to cut unilaterally its output if others did, and a senior official from the oil-rich Canadian province of Alberta said it will dial-in on the oil meeting.
Any deal will require diplomatic agility at a time when nations are devoting massive resources to fighting the pandemic itself. It’s also a battle of wills between Russian President Vladimir Putin, Saudi Crown Prince Mohammad bin Salman, and Trump. On all sides, there are maneuvers to avoid blame if negotiations fail.
Trump said Saturday at a White House press briefing he’d use tariffs if needed to protect the domestic oil industry, even as he predicted that Saudi Arabia and Russia would come to an agreement.
Saudi Arabia, which launched a price war last month with Russia after OPEC+ talks broke down, has made clear that it won’t cut production unless other producers -- including the U.S. -- also hold back supply. But Trump said on Saturday: “I don’t care about OPEC,” a “cartel” he’s opposed all his life.
In the latest maneuver in the price war, Saudi Arabia postponed on Sunday its monthly price-setting event for exported oil. Saudi Aramco’s official selling prices for May will be pushed to Thursday, according to people familiar with the situation. The OPEC meeting has also been tentatively rescheduled for Thursday.
The move allows the company to have a better idea of how negotiations are going before setting the prices that are its key weapon in its war with Russia for market share. Last month, it also delayed the event in the midst of wrangling at OPEC+ and responded to the breakdown in those talks with a historic price cut.
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