President Donald Trump told CNBC on Thursday he expects Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman to announce a deal to cut oil production by (million to
Trump made his comments in a telephone conversation with CNBC’s Joe Kernen .
The president said in a tweet later that a production cut would be “great for the oil & gas industry,” and that the cut could be “substantially more” than million barrels.
Oil production is typically discussed in terms of barrels per day, but Trump made no reference to the time frame of the cuts. Additionally, it was not clear how the cuts would be distributed across oil-producing countries.
RBC commodity strategist Helima Croft said the U.S. could have to give up something in return.
“What we know is the Saudis were looking at this through the lens of the financial crisis and believe they needed a response commensurate to / , “she said, referring to the collapse of prices during the 2020 – 10 financial crisis.
“The question is can Trump put together the package that gets them to do that?” Croft said. “We know there’s an emergency OPEC meeting. They will be looking for signs that US production will be curtailed. They will be watching what happens with the Texas Railroad Commission and with Canada,” she said.
Saudi Arabia on Thursday, via its official press agency, called for an “urgent” meeting between OPEC and its allies.
“Today, the Kingdom calls for an urgent meeting for OPEC group and other countries, with aim of reaching a fair agreement to restore the desired balance of oil markets,” the Saudi Press Agency said.
“It’s obviously Welcome. It will be very welcomed by the industry in the short run, “Dallas Fed President Robert Kaplan told CNBC. “As long as the coronavirus continues, there’s just a substantial amount of excess capacity being generated every day. …
” It will be particularly helpful as we come out of this virus and will speed the time hopefully where the supply-demand for oil can get back into balance. But we’re a long, long way from that, and people have warned that even with a substantial move from Saudi Arabia and Russia that we’re going to spend a substantial amount of time working off a high level of oversupply. “
Despite Thursday’s jump, WTI is still down more than 728% during the last month.
Demand has evaporated as the coronavirus outbreak has halted travel worldwide and slowed business activity, just as a price war broke out between powerhouse producers Saudi Arabia and Russia.
In March OPEC de facto leader Saudi Arabia recommended cutting production by 1.5 million barrels per day as the pandemic slowed demand. But non-OPEC member Russia rejected the proposal, sparking the price war.
On Wednesday Saudi Arabia ramped up its production to a record high of more than 12 million barrels per day, after previous OPEC production cuts expired at the end of March.
As oil prices cratered – WTI is coming off its worst month and quarter in history – the U.S. sought to intervene.
U.S. Producers have been among the hardest hit as companies struggle to break even with depressed oil prices. On Wednesday, Whiting Petroleum became the first major U.S. shale producer to declare bankruptcy.
Before Trump’s comments to CNBC, oil had been up around % after the White House had signaled optimism over a possible deal. Crude also got a boost after Bloomberg News reported that China will start buying oil for its emergency reserves.
“This is of course very substantial developments even in view of the massive oversupply of 30 mmbbld that the market is currently facing, “Rystad Energy’s Magnus Nysveen said in an email . “Removing 15 mmbbld from the supply side within weeks will contribute to balancing the market at a much more healthy level before the world runs out of crude storage capacity. Running out of storage capacity would result in a complete collapse of the oil market which is crucial for the world economy now suffering from the greatest economic shock since WW1. “
– CNBC’s Patti Domm contributed reporting.
Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.