Opec and its allies, led by Russia, agreed on Thursday to cut their oil production by more than a fifth, saying they expected the United States and other producers to join in their efforts to support prices that hampered the crisis.
The cuts to the oil cartel plus its allies, a group called Opec +, amount to 10m barrels per day (bpd) or 10% of global supply. Reductions of 5 million bd per day are expected to come from other countries to help navigate the deepest oil crisis in decades.
Global fuel demand has fallen by about 30 million bpd, or 30% of global supply, as measures to combat the virus have grounded aircraft, reduced vehicle use and slowed economic activity.
An unmatched cut of 15 m bpd still would not remove enough crude to quickly stop the world’s storage facilities. And far from signaling any readiness to offer support, US President Donald Trump has threatened Opec with sanctions if it does not solve the oil market’s problems of oversupply.
Trump, who has said US production was already plummeting due to low prices, warned Riyadh that it could face tariffs on its oil if it did not cut enough to help the US oil industry, whose higher costs have left it fight with low prices.
An assistant at the White House said Trump had had a conversation with Russian President Vladimir Putin and King Salman of Saudi Arabia after a US official said the move from Opec + sent a “vital signal” to the market.
Both Opec and Russian officials have said that the scale of the crisis requires the participation of all producers.
“We expect other producers outside the Opec + club to join the measures, which could happen tomorrow, during the G20,” said Kirill Dmitriev, head of Russia’s wealth fund and one of Moscow’s top oil dealers, Reuters.
Thursday’s Opec + call is followed by a call on Friday between energy ministers from the G20’s major economies, hosted by Saudi Arabia.
Brent oil prices, which reached an 18-year low last month, were at $ 32 a barrel on Thursday, half the level at the end of 2019.
Sources said the cuts would be gradual as the group tries to overcome opposition from the United States, whose commitment they see as crucial to a deal. US officials have already said production would decline naturally over two years.
The United States, whose production has risen to surpass Saudi and Russian production since it began large-scale fracking, was invited to Thursday’s Opec + call, but it was not clear if it had joined the video conference. Brazil, Norway and Canada were also invited.
In a sign that Opec + was struggling to gain broader support, Canada’s premier oil province, Alberta, said production had already fallen and that Opec had not asked for more cuts. The province said it supported the US idea for tariffs on imported crude oil.