Oil held near $20 a barrel as Saudi Aramco’s output surged above 12 million barrels a day, but Russia said it would refrain from further production hikes.
Crude futures in New York were little changed on Wednesday, following a record decline in the first quarter. While state-run Aramco’s oil supply has surpassed 12 million barrels a day and is ticking higher, Russia said it won’t lift output as it’s not profitable to do so, according to a government official familiar with the country’s plans.
The declarations follow a flurry of US-driven diplomacy with President Trump speaking with Russian and Saudi leaders in an attempt to bolster prices, though the former Opec+ allies have no plans to talk to each other, the Kremlin said.
Any agreement to cut output would likely be too late and would fall short of the loss in consumption globally, according to Goldman Sachs Group Inc. The market is grappling with a bumper oversupply, while Vitol SA, the world’s largest independent oil trader, says demand is set to fall by as much as 30 million barrels a day in April. As the glut grows, industry data signaled that US oil stockpiles are set for their biggest weekly increase since 2017.
“I do think both Russia and Saudi Arabia will be forced to cut back production, not because there’s a deal or they’re talking, but because of market forces,” Amrita Sen, chief oil analyst at Energy Aspects said in a Bloomberg TV interview.
Dated Brent, the benchmark for two-thirds of the world’s real oil supply, was assessed at $17.675 on Tuesday, down 11.5 cents from Monday when it was already the lowest price since 2002
Russia’s decision to not hike output further highlights the stress that producers are under the world over. Ecuador canceled an offer to sell almost 3 million barrels of oil this week, while key North Sea crude grades have been trading at their lowest levels in a decade.
“With a collapse in demand it is likely proving more and more difficult to place barrels, notably for Russia which has a large European base,” said Harry Tchilinguirian, oil strategist at BNP Paribas.
Trump: US, Saudi, Russia to meet on market crash
President Donald Trump said the US would meet with Saudi Arabia and Russia with the goal of stanching an historic plunge in oil prices.
Trump, speaking at the White House said he’s raised the issue in conversations with Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman. “They’re going to get together and we’re all going to get together and we’re going to see what we can do,” he said. “The two countries are discussing it. And I am joining at the appropriate time, if need be.”
If it happens, it would be the first meeting between Saudi Arabia and Russia since the collapse of the Opec+ coalition in early March.
Since then, both countries have vowed to flood the market with millions of excess barrels of oil in an acrimonious battle over market share. Despite the president’s remarks, neither nation has backed down from their price war, with Saudi Arabia having already loaded several supertankers with crude headed for Europe.
Trump’s intervention comes as April shapes up to be a calamitous month for the oil market. Saudi Arabia plans to boost its supply to a record 12.3 million barrels a day, up from about 9.7 million in February. At the same time, fuel consumption is poised to plummet by 15 million to 22 million barrels as coronavirus-related lockdowns halt transit in much of the world.
The global benchmark crude has already plunged to record lows, posting the worst quarter in history on Tuesday.
“It’s not even feasible what’s going on,” Trump said, adding that the price meltdown was harming the oil industry. “You don’t want to lose an industry — you’re going to lose an industry over it.”
Still, he celebrated the low gasoline prices brought about by the market downturn, calling them “the greatest tax cut we’ve ever given.”
“People are going to be paying 99 cents for a gallon of gasoline,” he said. “It’s incredible in a lot of ways.”