Oil jumped more than 11% in London as OPEC+ scheduled an urgent meeting next week to try and stem the crude market’s rout, with an output cut of 10 million barrels a day of global production being discussed.
The coalition will hold a meeting of its members by video conference on Monday. It will be open to all producers — not just members of the Organization of Petroleum Exporting Countries or its allies — though it’s still not clear who will attend, according to delegates.
A delegate said a global cut of 10 million barrels a day is a realistic goal. Every corner of the market has rallied from timespreads used to gauge market health, to key North Sea swaps.
Possible output cuts were first touted on Thursday by U.S President Donald Trump on Twitter, which prompted a surge in the markets. Some of those gains — as much as $10 at one point — subsequently ebbed away, with even a reduction of the size being discussed still just a fraction of the 35 million barrels of daily demand destruction some traders now see.
Citigroup Inc. and Goldman Sachs Group Inc. have argued any supply deal would anyway be too little, too late as demand craters due to efforts to stem the coronavirus.
“There does appear to finally be collective acceptance that the market is in such an extraordinary state of oversupply that coordinated action is needed,” said Callum Macpherson, head of commodities at Investec. “Given how difficult it is for OPEC+ to agree on a position, how they will manage to successfully coordinate with the U.S and other countries remains to be seen.”
The guest list of Monday’s meeting will be crucial as Saudi Arabia has made clear it will only cut production if others, including the U.S., shoulder some of the burden. While Trump tweeted Thursday that he had spoken to Saudi Crown Prince Mohammed bin Salman, who had in turn spoken with the Russian president, a person familiar with the situation said the U.S. president’s goal is purely aspirational and will ultimately hinge on whether Riyadh and Moscow can reach a deal.
The meeting will come as the physical market pressures producers into action. Belarus said Russian companies are offering Urals oil for $4 a barrel. Crude in the Bakken region of the U.S. is still only worth $12 a barrel.