OPEC+ Regroups on Output Cut Negotiations after Trump's Heel Turn

Having pushed back their critical emergency meeting to Thursday, OPEC and its allies have three days to heal a rift between heavyweights Saudi Arabia and Russia, forge an elusive agreement on output cuts, and convince other key crude producing countries to join their crusade against the oil market's coronavirus meltdown.

Delegates say they have been working their phones day and night since the meeting – originally scheduled for Monday – was called by Saudi energy minister Prince Abdulaziz bin Salman.

Initial aspirations for a 10 million b/d collective production cut that could include the US appear to have faded to more realistic goals, given US President Donald Trump's shift over the weekend to a more combative stance against OPEC.

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Trump on Friday emerged from a meeting with the CEOs of several US oil companies saying he was not inclined to force them into reining back output, before escalating his rhetoric on Saturday, threatening tariffs on US oil imports and claiming that OPEC and Russia would be "destroyed" if they did not reach a new supply accord.

"I had been against OPEC all my life; because what is it? It's illegal, you can call it a cartel, a monopoly. I couldn't care less about OPEC," he said.

Still delegates said not all hope is lost and that OPEC Secretary General Mohammed Barkindo has cast a wide net in the alliance's search for partners, with Norway and Canada, among others, appearing open to cooperation.

"Nobody wants to be responsible for the current state of the oil market," one delegate told S&P Global Platts, asking not to be identified due to the sensitivity of the discussions.

Barkindo did not respond to a request for comment.

Thursday's OPEC+ meeting will be held by webinar due to coronavirus concerns, but no time has been set. Energy ministers of the G20 will reportedly meet Friday, at the urging of the International Energy Agency, to bring any output cut deal under the auspices of the economic forum, which is chaired by Saudi Arabia this year.

Saudi state oil giant Aramco and the UAE's Abu Dhabi National Oil Company have delayed issuing their official selling prices for May crude exports pending the outcome of the OPEC+ talks, industry sources familiar with the matter told Platts on Sunday.

Saudi Aramco typically sets its OSPs by the fifth of each month, and is closely followed by ADNOC and other Middle East national oil companies.

Aramco sparked a 30% plunge in crude prices last month when it aggressively slashed its April OSPs, in a salvo against Russia after the OPEC+ coalition's last meeting on March 6 ended in acrimony with no agreement on production cuts.
NEGOTIATING THROUGH THE HURT

To reach any agreement, Saudi Arabia and Russia will have to call a truce in their blame game over who was more responsible for the price crash and who was targeting US producers' market share.

The latest tit-for-tat came after Russian President Vladimir Putin on Friday denied that Saudi Arabia's goal in boosting its production to record levels was to wipe out US shale companies, a charge that drew an angry condemnation from Prince Abdulaziz, who called the comments "categorically false and contrary to fact."

Kirill Dmitriev, the CEO of the Russian Direct Investment Fund who has generally been supportive of Russia's engagement with OPEC, perhaps sought to smooth over the dispute, saying in an interview on CNBC on Monday that the two countries were "very, very close" to a deal on production cuts and global cooperation was urgently needed.

"I think it's Russia, US, Saudi Arabia and other countries that need to step in to stabilize the markets and to bring stability to the world which is probably about to see probably the greatest recession ever," he said.

Indeed, the OPEC+ coalition faces doubts that any cut agreement it can reach will be sufficient to combat the coronavirus pandemic's impact, with some analysts forecasting a decline in oil demand of 20 million b/d or more for 2020.

But Kamil al-Harami, an independent oil analyst based in Kuwait, said it was important for the OPEC+ to return to a functioning organization that can at least have some measure of control over global crude supply. That would at least put a floor under prices and stop the market's freefall.

"Any cuts will do to show solidarity," he said. "Any number will do to stabilize oil markets for the time being."

Ministers and delegates still have much talking to do, and Thursday's meeting could well be a defining moment for the oil market.