DUBAI: Big oil producers are divided over the way forward on the eve of two days of “virtual” talks aimed at rebalancing the global market.
Industry sources in Saudi Arabia and Russia told Arab News on Tuesday they were still hopeful of an agreement to cut oil output at a meeting on Thursday of OPEC and non-OPEC members, the so-called OPEC+ group.
But they said issues remained to be resolved, and a full agreement may be delayed until after Friday’s meeting of G20 energy ministers under the Saudi presidency.
The oil price, which has rebounded from lows this week after the intervention of US President Donald Trump, gave few clues to the market’s view. Trading in Brent crude, the Middle East benchmark, was quiet until a late surge of nearly 4 percent to nearly $34 a barrel.
Trump has said he “expected” cuts in oil output of up to 15 million barrels a day, but most experts believe that is impossible, even if US producers join in.
Reports from Moscow suggested Russia was considering cuts of 1.6 million barrels a day, but President Vladimir Putin’s spokesman said there were significant differences to be bridged before a deal could be done, especially with regard to US involvement.
“There are different concepts and they cannot be equated,” he said. “The natural decline in US oil production cannot be compared with reductions to stabilize oil markets.” US producers have slashed capital expenditure and oil output in the face of plunging global demand.
The Texas oil and gas regulator, Ryan Sitton, said US producers were likely to “organically” cut 4 million barrels of oil per day over the next three months, but cuts of 20 million barrels were needed from OPEC+ countries. Industry experts said this was unlikely.
“Trump has made a big mistake by blaming Saudi Arabia and Russia. He will be shocked when oil prices remain low even if we have a 10 million barrel cut,” said Anas Al-Hajji, managing partner of Texas oil consultancy Energy Outlook Advisers.
JP Morgan, the big US bank with a long-standing relationship with Saudi Arabia, said the most it expected from the OPEC+ talks was a commitment to cut 4.3 million barrels a day.
“The Saudis want to keep pressure on oil prices in order to gain a larger market share and concessions from Washington,” the bank said.
Influential energy expert Daniel Yergin predicted cuts of 10 million barrels, including America’s “natural decline.”
“The collapse in world oil demand and low prices are driving large spending cuts among oil companies around the world. The largest cuts in percentage terms so far are coming from north America,” he said.