DUBAI (Reuters) – Saudi Arabia is taking unprecedented action in delaying the release of its international crude selling prices by five days, a senior Saudi source familiar with the matter said on Sunday, as the kingdom and other major producers seek to halt the free-fall in worldwide crude prices.
But oil prices fell anew at the open of Asian trading as the weekend did not bring major producers Saudi Arabia, Russia and the United States any closer to resolving a growing supply glut that is overwhelming markets.
A month-long price war between Saudi Arabia and Russia, against the backdrop of the coronavirus pandemic, has cut the price of crude to $34 a barrel from $65. Members of OPEC, led by Saudi Arabia, have stepped up efforts to resolve the dispute in recent days, but they have called on other big producers – including the United States – to be involved.
The Organization of the Petroleum Exporting Countries is expected to meet Thursday – delayed from Monday – to discuss cutting production to alleviate a supply glut as fuel demand is expected to fall by about a third worldwide due to the COVID-19 pandemic.
Oil prices hit an 18-year low on March 30 but have since rebounded somewhat. On Friday, Brent crude futures LCOc1 settled at $34.11 a barrel; in early Asia trading, prices fell to $32 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 fell to $26.15 a barrel on Sunday from a $28.34 close on Friday. [O/R]
Major producers from members of OPEC, to Russia, the United States, and Canada, have all expressed hope that a production-cut deal would be worked out. However, the weekend was marked by ongoing sniping between Russia and Saudi Arabia over the demise of the previous OPEC agreement.
President Donald Trump last week touted the possibility of a deal between Saudi Arabia and Russia to cut output by as much as 10 to 15 million barrels per day, but that would likely need the cooperation of nations that are not part of OPEC, where national governments do not exert control over private-company output.
Trump, for the second day in a row, threatened on Sunday to impose tariffs on crude imports in an effort to force Saudi Arabia, Russia and other major producers to agree to production cuts. He said he would do “very substantial tariffs” if the oil price stays the way it is, but added that he did not think he would need to do so.
“I don’t think I’m going to have to because Russia doesn’t benefit by having this, and Saudi Arabia doesn’t benefit,” Trump told a White House briefing on the coronavirus crisis.
Iraq’s oil minister said on Sunday that any new deal needs support from key producers from outside the OPEC+ alliance, such as the United States, Canada and Norway. The White House has not suggested it would try to persuade producers to reduce output.
National oil company Saudi Aramco 2222.SE typically issues its Official Selling Prices (OSPs) by the 5th of each month, setting the trend for Iranian, Kuwaiti and Iraqi prices and affecting more than 12 million barrels of oil per day bound for Asia. <CRU/OSP>
“That’s a pretty clear sign that they are open to cutting in May,” said Robert McNally, president of Rapidan Energy Group in Bethesda, Maryland.
The OPEC+ meeting was initially due to take place on Monday, but was postponed to April 9 “to allow for more time to reach out to all producers, including OPEC+ and others”, the Saudi source said.
“It is an unprecedented measure that has not been taken by Aramco before. May OSPs will depend on how the OPEC+ meeting concludes. We are doing what we can to make it (the meeting) successful, including taking this extraordinary step to delay the OSPs,” the Saudi source said.
The Saudi source said that Riyadh wants to avoid a repeat of the outcome of a March meeting where oil talks collapsed due to Russia’s refusal to cut output.
The kingdom’s aggressive price cuts in early March shocked the oil industry, kicking off a downward spiral in the oil market that accelerated with the worsening of the coronavirus pandemic.
Russian President Vladimir Putin blamed the crash in prices on Saudi Arabia on Friday, prompting a firm response from Riyadh the following day disputing Putin’s claims.
On Sunday, Kremlin spokesman Dmitry Peskov said Russia wants constructive talks on the situation in the oil market and sees no alternative to dialogue, Interfax news agency reported.
“Russia was not in favour of terminating the OPEC+ deal. President Putin and Russia are committed to a constructive negotiation process, which does not have an alternative for stabilising the international energy market,” Peskov said.
Coordinated cuts between OPEC+ members expired on March 31, having helped support crude prices since they began in January 2017.
Trump has made no commitment to take the extraordinary step of persuading U.S. companies to cut output. The idea of Washington curbing production has long been seen as impossible, not least because of U.S. antitrust laws.