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Saudi Arabia seeks urgent oil meet, Trump says oil cuts could hit 15 mln bpd

Published: Updated:

Saudi Arabia unexpectedly called an urgent meeting of oil exporters after US President Donald Trump revived slumping oil prices with a tweet saying he expected the Kingdom and Russia to cut production by 10-15 million barrels per day.

Global oil demand has fallen off a cliff because of the global slowdown caused by the coronavirus pandemic, which has been compounded by a collapse in an agreement between OPEC and allied exporters, known as OPEC+, to regulate global supply.

“The kingdom calls for an urgent meeting of OPEC+ and a group of other countries with the aim to try and reach a fair deal to restore balance to the oil market,” said a statement carried by the official Saudi Press Agency.

Saudi Arabia wants US producers, Canada, Mexico and others in G-20 to join any cuts, sources told Wall Street Journal.

US President Trump initially wrote in a tweet that he had spoken to Saudi Arabia’s Crown Prince Mohammed bin Salman, “who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!”

He followed this with another tweet stating: “Could be as high as 15 Million Barrels. Good (GREAT) news for everyone!”

Oil prices shot up by as much as 25 percent to above $25.00 in New York, having fallen by half in the last month.

The Kremlin later denied that Russian President Putin had been in contact with Saudi Arabia’s Crown Prince Mohammed bin Salman.

“No, there was no conversation,” Putin’s spokesman Dmitry Peskov told Interfax news agency, according to AFP.

Saudi Arabia has increased oil production to more than 12 million barrels per day since the collapse in the OPEC+ deal with Russia on March 5 in Vienna.

Analysts were skeptical of the plan put forward by Trump, simply because the scale of the cuts would be unprecedented.

“I am skeptical about the size of the cuts. 10-15 million barrels per day is half of OPEC’s total production,” said Robin Mills, CEO of consultancy Qamar Energy. OPEC pumped 28 million barrels per day in March, roughly one third of the world’s total production.

US shale oil firms have been among the first to suffer from the recent price collapse, because they are among the highest cost producers in the world. US oil companies need a price of $43 to $55 per barrel just to break even – compared to Saudi Aramco, the cheapest producer, at just around $3 per barrel.

The US has become the largest producer of oil in the world after a decade-long surge in output, but output levels have already begun to fall since last month when prices collapsed. Some US oil producers have called on Trump to do a deal with the other producers, while others have asked for a federal bailout.

Trump’s tweets made no mention of other countries that would be expected to join Saudi Arabia and Russia in the supply cuts, but Saudi Arabia’s position has been clear. In its statement, the kingdom made clear that the cut would have to be shared fairly.

Read more:

Saudi Arabia calls for urgent OPEC+ meeting to stabilize oil market

Russia does not plan to raise oil output: Novak

Saudi Arabia supports cooperation among oil producers: Senior Gulf source