The Saudi Arabian Minister of Energy Prince Abdulaziz bin Salman Al-Saud and the Russian Minister of Energy Alexander Novak can be seen at the beginning of an OPEC and NON-OPEC meeting on December 6, 2019 in Vienna.
Leonhard Foeger | Reuters
The virtual meeting scheduled for Monday between OPEC and its allies has been postponed, sources familiar with the matter told CNBC as tensions between Saudi Arabia and Russia increase. The meeting will now “probably”
The Monday meeting was scheduled after President Donald Trump told CNBC on Thursday that he expected Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman to announce a contract to reduce production by up to 15 million barrels and with had spoken in both countries’ leaders.
The delay is likely to hit oil prices next week after a record-breaking comeback week for crude oil. US oil rose 25% on Thursday, another 12% on Friday. It ended the week up 32%, broke a 5-week losing streak, and had the best weekly performance ever, back to contract start in 1983.
“It will likely be a crater,” Capital’s John Kilduff said again. “There was a lot of optimism about oil on Thursday and Friday. With this new spit from Saudi Arabia, it doesn’t look like it will come together.”
Despite the surge in the past week, West Texas Intermediate’s crude oil price has still dropped nearly 40% in the last month following the destruction of demand by the Corona virus outbreak and the price war between Saudi Arabia and Russia.
The jump on Friday was fueled by a Reuters report that OPEC + is considering cutting production equivalent to about 10% of global supply, and Putin said a 10 million barrel a day cut is possible.
Both Saudi Arabia and Russia have sought US cooperation to balance global oil supplies. American drills are still pumping near record levels as the world reaches the edge of its ability to store oil.
US oil managers met with the President at the White House on Friday, and there was speculation that he would ask them to work together on cuts. No agreement was reached on the meeting, but Trump seemed to reflect the industry’s view that market forces should determine prices.
“These are great companies and they will find out,” he said at a White House briefing after meeting with the energy CEOs. “It’s a free market, you’ll find out.”
At its March meeting, OPEC proposed that production be cut by 1.5 million barrels a day to counter the fall in demand. However, OPEC ally Russia rejected the additional cuts. The meeting ended without agreement, and in retaliation, Saudi Arabia lowered its oil prices to gain market share and then increased its production to a record high of more than 12 million barrels a day.
Tensions between Saudi Arabia and Russia have increased since then. In Friday’s comments, Putin blamed Saudi Arabia for the plunge in oil prices that had emerged from the more than three-year-old OPEC Plus deal, along with increased production and discounts agreements that exacerbated the Corona virus strike.
Saudi Arabia struck back. In a statement on Saturday, Saudi Foreign Minister Prince Faisal bin Farhan said Putin’s comments were “without truth”.
Saudi Arabian Minister of Energy Prince Abdulaziz bin Salman also made a statement on Saturday, saying that the comments from Russian Minister of Energy Alexander Novak were “categorically wrong and contradictory”. The statement said the Saudi minister “expressed his surprise at attempts to host Saudi Arabia against the shale oil industry.” The minister noted that Saudi Arabia is a major investor in the US oil sector.
“Now we have two problems,” said Helima Croft, head of global raw materials research at RBC. “According to President Trump’s statement, it seems pretty unlikely that a production commitment is imminent. And it looks like we could have a new diplomatic divide between Russia and the Saudis … The Saudi minister is furiously pressing for the Russian claim Ministers back that the Saudis are targeting slate. “
The US oil industry is divided over whether it could or should help cut production to stabilize prices.
The American petroleum industry is opposed to cuts, saying that such a move would harm US industry. In Texas, Ryan Sitton, one of the three members of the Texas Railroad Commission, said the state would consider participating in such a deal.
OPEC has invited the Texas Commission to attend its June meeting, and Sitton said on Thursday that he had spoken to the Russian energy minister Alexander Novak about production cuts.
Oil-producing states like Texas have the power to manage production, although the federal government cannot manage production and a consortium of cooperating companies would be considered a violation of antitrust law. The Texas commission last restricted production in 1970. She has scheduled a meeting for April 14th.
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