Brent inched up 40 percent in just two trading sessions last week. Such has been the fall that global crude is still lower by a third since beginning of March 2020. The unceremonious Opec Plus fallout last month was a catastrophic event in itself, with or without the extremely disturbing global oil demand projections, amid the coronavirus.
Trump fueled hope over the weekend as he signaled at an unprecedented planned reduction in global oil production to the tune of 15 million barrels a day. Trump tweets have impact – and the oil market was surely in a desperate need of an impact – be it a Tweet only. And like most Trump tweets, rebuttals followed soon after – creating more confusion than hope by the weekend.
The much anticipated Opec Plus meeting which was earlier scheduled for Monday has now been tentatively rescheduled for Thursday. This alone carries enough ammunition to wipe out some of the weekend gains. The USA could not have been kept out of the equation for much longer in such a price crash – as the shale players were increasingly feeling the heat. The US already battling with the coronavirus, would surely go to all extents to help preserve its oil industry – that offers jobs to millions.
But any deal after such a meltdown last month would not be easy. There is no denying that the only end to this madness is negotiations as Saudi Arabia is and Russia are both pumping at full throttle, in days of such compressed demand and overflowing storages.
Russia has officially maintained that 10 million barrels a day could still be shaved off the global production. It has also “unofficially” stressed that there would be no deal without the USA being an active player in the production cut. Also taking a jibe at Saudi Arabia, Russia hinted that Saudis had started the price war to corner the American shale players. This has not naturally gone down well with the Kingdom – which views this as an attempt to sabotage Saudi’s close ties with the US.
President Trump has not been fond of Opec and misses no opportunity to make the world know. He was soon to react, stopping just short of officially dismissing the possibility of US joining a production cut deal. The other key North American oil producer, Canada has been more open to the ideal of possibly joining the cut – should it be required. But Trump has threatened to use the tariffs on oil imports as a tool to save the US oil industry at all costs. This is basically a message to the Russians and Saudis to sort it out between themselves. The drama continues. Expect it to take more twists and turns this week.