WASHINGTON (MaceNews) – The United States, OPEC members and other oil-exporting countries Friday wrestled with a daunting task, to persuade traders and customers that they can do something to overcome the biggest destruction of demand in the history of the oil industry.
Even the White House tried to square the circle by promising to help limit production in a circuitous way, showing how even a free-market devotee like Donald Trump can overcome the impulse to build market share.
What has come to be known as OPEC+, forced to wrangle via teleconference by the virus that is keeping millions of vehicles parked, is faced with making huge compromises that have monumental consequences for their member economies.
As the negotiating goes on President Trump told the world Friday he is trying to help out, taking on some of the production cuts being demanded of Mexico as he acts in behalf of America’s Oil Patch, and to some extent that of Russia and Saudi Arabia as well.
Yet the oil market has been unimpressed so far, keeping the cost of the U.S. West Texas Intermediate in the low $20 range, on Friday, down 7.7% at $22.76.
The worldwide cut in oil consumption – documented by a near worldwide atmospheric clearing unseen in some capitals in decades – coupled with a price war between Saudi Arabia and Russia had threatened oil cheaper than $10 a barrel. The threat remains despite a still highly contingent workaround still being forged among the major players.
Whether any agreement can turn the market around is still to be seen and the 10% cut on the table as talks go on has been deemed insufficient by oil market analysts and the market price.
The world benchmark, Brent, was at $32.03 late Friday, somewhat improved after the Group of 20, holding its own teleconference, made a vague commitment to contribute some production trimming.
President Trump, in the midst of a daily briefing on the state of the battle against the corona virus, Friday confirmed his continuing efforts to nudge a deal n the negotiations in which the U.S. is not formally participating.
After talking to Russia and Saudi Arabia Thursday, he struck an arrangement with the holdout producer, Mexico, which has been unwilling to shutter the full 400,000 barrels a day being asked of it. The U.S., he said, will commit to sacrificing 250,000 or so barrels worth of daily output in Mexico’s behalf and Trump said Mexico would “reimburse” the United States somehow down the line.
In Mexico the arrangement was described as 250,000 to 300,000 barrels a day in substituted cutbacks.
Ignoring for the moment how such a U.S. production cut would be certified, given that would involve the consent of domestic producers and Texas state regulators, Trump said he hoped it would help cement a deal yet wasn’t sure it would.
“I’m seeing 90 cents, 85 cents in different parts of the country a gallon,” Trump said. “Nobody’s ever seen that.”
Promising to cut 250,000 barrels a day “is a small amount for us,” he said. “It’s a larger amount from Mexico, but it’s a very small amount for the United States being the biggest producer.”
In fact the “biggest producer” title won by U.S. fracking technology is imperiled as long as Saudi Arabia is dumping massive amounts of its production on the market. That competition with Russia, which initially didn’t want to cut, appears to be ended, at least until any collapse of the global deal.
Now that the Saudis and Russia are tentatively back on the same page, the question remains if they and the United States can engineer an oil-price boost big enough and persistent enough to make a real difference while ignoring for the time being their competitive interests.