Saudi Arabia, Russia and allied oil producers will only agree to deep cuts to their crude output at talks this week if the United States and several others join in with curbs to help prop up prices that have been hammered by the coronavirus crisis.
However, the US Department of Energy noted in a Tuesday statement that US output is already falling without government action, in line with the White House’s insistence that it would not intervene in the private markets. That decline, however, would take place slowly, over the course of the next two years.
Global oil demand has dropped by as much as 30 percent, or about 30 million barrels per day (bpd), as measures to reduce the virus’s spread have caused demand for jet fuel, gasoline and diesel to crash. France reported on Tuesday a 80 percent drop in petrol use.
While Saudi Arabia, Russia and other members of the group known as OPEC+ have expressed willingness to return to the bargaining table, they have made their response conditional upon actions by the United States and other countries that are not members of OPEC.
“Before any meeting between OPEC and non-OPEC there needs to be an agreement on production numbers for any country that will reduce production,” Iran’s Oil Minister Bijan Zanganeh tweeted on Tuesday, adding that the United States and Canada need to play a role in determining production cuts.
“With regards to media reports that OPEC+ will require the United States to make cuts in order to come to an agreement: The EIA report today demonstrates that there are already projected cuts of 2 (million bpd), without any intervention from the federal government,” the US Energy Department said.
No agreement has yet been formalised. Riyadh and Moscow are trying to overcome the rancor stemming from March’s talks, when a deal to extend production cuts fell apart. Benchmark Brent crude was trading at about $33 a barrel on Tuesday, about half its level at the end of 2019.