Saudi Arabia, Russia Press U.S. to Coordinate Oil Cuts, Pushing Up Prices - The Wall Street Journal

Russian President Vladimir Putin, left, and King Salman of Saudi Arabia in Riyadh in October... — Russian President Vladimir Putin, left, and King Salman of Saudi Arabia in Riyadh in October 2019.
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Updated April 3, 2020 1:59 pm ET

Saudi Arabia and Russia are pressing the U.S. to coordinate oil output cuts in an attempt to stabilize prices, OPEC officials said, as the demand for crude plummets amid the coronavirus pandemic.

U.S. oil companies are divided over the proposed cooperation between the world’s three biggest crude-producing nations, which would be unprecedented. Some major oil companies, including Exxon Mobil Corp. and Chevron Corp., are opposed to the plan. Some American shale producers, including Pioneer Natural Resources, are trying to find ways to join the Saudi-and-Russia-led plan.

Top executives from U.S. energy companies were expected to take up the matter in a White House discussion convened by President Trump on Friday.

The Saudi-led Organization of the Petroleum Exporting Countries and 10 nations led by Russia are set to hold a virtual emergency meeting on Monday. The group is considering whether to invite representatives from the U.S. and Canada, including from Texas and Alberta. The outcome of Monday’s summit will largely depend on whether Mr. Trump and U.S. oil companies can reach a consensus on oil production cuts on Friday.

While the U.S. government and some companies cannot formally join the 23-nation Saudi-and-Russia-led alliance because of antitrust and sovereignty issues, they are trying to figure out ways to convince Saudi Arabia and Russia to reduce output. Riyadh and Moscow have privately made it clear they won’t cut output unless U.S. producers do so as well.

Mr. Trump said Thursday he was hopeful that a truce could be worked out in the oil-price war between Saudi Arabia and Russia after he had spoken to Saudi Crown Prince Mohammed bin Salman.

Saudi Arabia, the world’s largest crude exporter, slashed its prices and said it would unleash a flood of oil last month after it failed to reach a deal with Moscow on a response to falling demand. The ensuing price war, along with lockdowns and travel bans amid the pandemic, have pushed oil prices to their lowest level in 18 years.

Mr. Trump’s remarks on Thursday sparked a record-breaking percentage climb in oil prices, with Brent and U.S. crude notching gains of 21% and 25%, respectively.

Crude Leaps More Than 20% on Hopes Price War Will End (April 2)
Inside Saudi Arabia’s Decision to Launch an Oil-Price War (March 10)

Brent crude, the global benchmark rose another 9% to $32.70 a barrel on Friday, on course to finish the week 17% higher. West Texas Intermediate futures, the U.S. bellwether, were up 6.5% at $26.98 a barrel, set for a weekly gain of 25%. Still, both benchmarks have lost around half their value so far in 2020.

The Saudi-and-Russia led alliance will discuss output curbs of 10 million barrels a day including North America, on the Monday conference call, the officials said. It wasn’t clear whether North American producers would participate. They haven’t attended OPEC gatherings in many years.

Under that option, Saudi Arabia would reduce output by 3 million barrels a day from current levels, a group of other Persian Gulf countries and Russia by 1.5 million barrels a day each, these people said. Oil producers outside the Saudi-Russian oil alliance, in the U.S., Canada, Brazil and others, would reduce output by about another 2 million barrels a day, they said. The rest of the cuts would be shared between smaller producers who already belong to the Saudi-Russian alliance.

Among those are some U.S. shale producers, who have told OPEC they were ready to carry voluntary production cuts amid a ballooning oil glut, said people familiar with the matter. Some of them, in Texas, are backing the possible curtailment of 500,000 barrels a day, these people said. But major oil companies are worried any concerted curbs could expose them to risks of lawsuits on antitrust grounds, they said.