US President Donald Trump said that he had a “very good talk” with his Russian and Saudi counterparts amid reports oil producers are about to reach a deal to cut output. Trump warned of major layoffs if it falls flat.
“The conversation was very good. They’re getting close to a deal.” the president said at a White House briefing on Thursday, adding that an announcement on the talks could come sometime in the next day.
Trump did not specify what oil price would be needed to keep the American shale oil industry afloat, however, stating only that “we need a minimum number so these companies don’t go out of business.”
Market analysts have estimated that American producers need WTI crude prices to remain around $40 per barrel to keep the shale industry competitive, requiring a near-doubling of the current price level.
Lamenting currently rock-bottom oil prices – stemming from a combination of sweeping lockdown measures across the globe to contain the coronavirus and a price war between Moscow and Riyadh – President Trump warned that “there will certainly be layoffs in this country” if OPEC fails to reach a deal, stressing the need for a significant output cut among major oil producers to save tens of thousands of American jobs.
There’s so much production nobody knows what to do with it. … Frankly, there’s not enough room to even store it
OPEC+ met earlier on Thursday to discuss proposed production cuts to bring prices up, with reports stating the group had agreed to reduce output by 10 million barrels per day for two months starting in May, and to then ease the cuts to 8 million bpd until the end of the year. The bloc of producers has not yet confirmed any agreement, however, though the US president suggested they were on the cusp of a deal after his call with Putin and the Saudi king.
Moscow has signaled it would accept prices at $42 per barrel, close to the target set to salvage the US shale sector, though Riyadh requires a much higher price point, up to $80 per barrel, in order to fund its entitlement programs, energy experts estimate.
Oil prices fluctuated by a wide margin on Thursday as reports emerged on a potential OPEC deal, surging by over 12 percent for a brief time, sending Brent crude futures to nearly $34 a barrel and WTI crude to more than $26. But the rally did not last long, and prices soon sunk by some 10 percent as no agreement was announced.