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Saudi, Russia move closer to record oil cut deal: sources : The Standard




OPEC and other oil nations held talks on Thursday on a record global production cut of up to 20 million barrels per day, equal to about 20% of global supplies, to support prices hammered by the coronavirus crisis, OPEC and Russian sources said.

Talks have been complicated by friction between OPEC leader Saudi Arabia and non-OPEC Russia, two of the world’s biggest oil producers. But OPEC and Russian sources said they had managed to overcome their differences.
“That is a global deal,” one OPEC source said, without specifying whether it would involve the United States, something Russia and OPEC producers have insisted on.
Global fuel demand has plunged by as much as 30 million bpd, 30% of global supplies, as measures to fight the coronavirus have grounded aircraft, reduced vehicle usage and curbed economic activity. So even a 20 million bpd cut falls short.

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Benchmark Brent oil prices LCOc1 hit an 18-year low last month and were trading on Thursday around $33 a barrel, half their level at the end of 2019, dealing a severe blow to budgets of oil producing nations and high-cost U.S. shale oil industry.
U.S. President Donald Trump said last week a deal he had brokered with Saudi Arabia and Russia could lead to cuts of 10 million to 15 million bpd. Even that range, which was lower than the one cited by sources on Thursday, would be unprecedented.
The biggest one-off cut previously agreed by OPEC alone was 2.2 million bpd during the 2008 financial crisis.

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OPEC sources have indicated that any deal on major cuts would required the participation of the United States. But Washington has yet to show it is ready to commit to such a pact.
Kremlin spokesman Dmitry Peskov said a new deal on cuts was “hardly possible” without others participating.

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Peskov was speaking before the start of a video conference at 1425 GMT between ministers from OPEC+ – which groups the Organization of the Petroleum Exporting Countries, Russia and other oil producers – as well as additional participants.
The United States was invited but it was not clear if it joined the video conference. Washington has previously said U.S. output was falling gradually due to lower prices, although Russia said that was not the same as making cuts.
It was not clear from what levels Moscow and Riyadh were proposing to agree any cuts. Moscow had said reductions must be based on levels in the first quarter. Saudi Arabia has said the baseline should be from April, when its output jumped steeply.
Goldman Sachs and UBS both said that even major cuts suggested the build up to Thursday’s talks would not be enough and predicted oil prices could fall to $20 per barrel or less.


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“Ultimately, the size of the demand shock is simply too large for a coordinated supply cut,” Goldman said in a note.
In the United States, gasoline demand tumbled 48% to 5.1 million bpd in a three-week period to April 3.
Thursday’s OPEC+ talks will be followed by a call on Friday between energy ministers from the Group of 20 (G20) major economies, also hosted by Saudi Arabia.
Friday’s talks could see importing nations announce plans buy oil for their strategic reserves to boost demand, said Fatih Birol, the head of the International Energy Agency.
Several U.S. states could order private companies to limit production under rarely used powers. The oil regulator in Texas, the largest producer among U.S. states with output of about 5 million bpd, meets on April 14 to discuss possible curbs.

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But Trump has not shown any appetite for U.S. cuts, instead he has said he had many options if Saudi Arabia and Russia failed to reduce supplies. U.S. senators called on the White House to impose sanctions on Riyadh, pull out U.S. troops from the kingdom and impose import tariffs on Saudi oil.
Russian TASS news agency said any cuts that are agreed could last three months starting from May.

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