Saudi Arabia and Russia are nearing a deal to settle their oil production cut agreement and curb a global surplus, a top Russian negotiator said Monday, although Moscow sources said it was ready for major reductions, ahead of talks scheduled for this week.
A supply agreement between Moscow, OPEC, and other producers, a coalition known as OPEC Plus, which for three years had helped oil prices to soar, collapsed in March just as the impact of lockouts to contain the spread of the coronavirus distorted global demand.
Today's oil prices dropped after Saudi Arabia and Russia delayed a meeting to negotiate production limits that could help minimize world surplus as the pandemic cripples demand.
Brent crude was down over US$3 when Asian markets opened but regained some ground, with investors optimistic that a contract between Moscow and Riyadh was still doable.
Brent dropped 80 cents or 2.4 per cent or US$ 33.30 per barrel. US crude was 64 cents, or 2.3 percent lower than a session decline of US$ 25.28 per barrel.
Demand for oil has plummeted by more than a quarter globally, or about 30 million barrels per day, as Saudi Arabia and Russia have saturated markets with extra stockpiles.
The U.S. has not agreed to participate in any transaction which U.S. President Donald Trump said he could take 15 percent of global reserves off the market. Because of antitrust laws U.S. businesses can not coordinate with production.
Instead, Trump's administration disclosed it was facilitating discussions among the other governments. Large U.S. oil producers and business organizations are against mandatory cutbacks, which would be an unprecedented move in the U.S.
"I think the entire market knows that this agreement is crucial and will bring a lot of stability, and we're very close to a deal with Saudi Arabia," Kirill Dmitriev, one of Russia's top oil negotiators, told CNBC.
Last month, Dmitriev was the first official from Moscow to make a public announcement on the need for an expanded supply deal, possibly including producers outside the OPEC Plus bloc.
Russian spokesperson Dmitry Peskov said that Moscow was prepared to cooperate with other oil exporting nations to help balance the market and that the OPEC Plus meeting was postponed due to technical reasons and readiness for the talks was underway.
G20 oil and energy officials and members of other international groups will conduct their own video conference, to be hosted by Saudi Arabia, a senior Moscow representative said. Efforts to get Washington to participate in the production cut agreement will be on the agenda, sources stated.