Oil markets are in a state of high anticipation, awaiting the OPEC + online meeting next Thursday, hoping for a decision that balances oil markets are increased, and this is what the actions of the main parties indicate.
Moscow’s announcement of participating in the long-awaited meeting brought optimism to the markets, represented in the significant increase in oil prices, together with President Trump’s positive statements concerning the reduction of US production.
A spokesperson for the Russian Ministry of Energy confirmed to Reuters News Agency that Russia will participate in the OPEC+ meeting, scheduled on April 9.
Markets wise, the Brent crude has risen 90 cents, or 2.7%, to a record $ 33.95 a barrel by 07:47 GMT, where hopes increased about that major crude producing countries will reach an agreement in reducing production in the light of a sharp slowdown of the global economy, due to the Coronvirus pandemic.
Sources in OPEC said that the meeting was first scheduled on April 6, but it was delayed to give more time for negotiations.
The OPEC spokesperson confirmed to Reuters that any final agreement will be reached in the talks of April 9, on the cuts of OPEC and its allies, within the framework of the OPEC + coalition, will depend on the reduction decided by other producers such as the United States, Canada and Brazil.
He clarified that no reduction agreement has been reached yet, after the production of some member states has been increased following the expiration of the OPEC + agreement to reduce production on March 31.
OPEC, in addition to its partners in OPEC + Russia, asked 10 producing countries – the US, Canada, UK, Norway, Brazil, Argentina, Colombia, Egypt, Indonesia, Trinidad and Tobago – that have no previous cooperation with the organization but are concerned with prices reduction to attend the summit.
The US President Donald Trump stressed that OPEC did not press him to ask the US oil producers to reduce production in support for the global crude prices that witnessed sharp drop due to the economic consequences of the Corona pandemic.
Informed sources told Reuters that the major oil producing countries, including Saudi Arabia and Russia, are likely to reach an agreement to cut production at the awaited meeting, but that will not happen unless the US participates in those efforts.
Relatedly, global demand for oil has fallen by nearly 30%, about 30 million barrels per day, as the Corona pandemic caused a sharp slowdown in the global economy.
The American oil sector was significantly affected by the recent market changes, as several US companies have already reduced their production as oil lost about two-thirds of its value this year.
In this case, any decision to reduce production coordinated between US oil producers to support prices would violate US antitrust laws.
However, Barbara Sicalides, an antitrust expert at Pepper Hamilton says: “This kind of conduct in private industry would not be permitted, but under the state action doctrine it is allowed if it is done under the commission’s authority.”
It is noteworthy that the meeting aims at reducing production by ten million barrels per day, an enormous amount, to stop the collapse of oil prices that have been continuing for weeks due to the Coronavirus crisis.
Washington has played a hidden role in the meeting’s rationale, as US President Donald Trump was the first to refer to the number of 10 million in a Tweet, which caused a rise in the oil prices.
This was followed by indications from Riyadh and Moscow to resume the talks, as Putin called to “unite efforts to achieve a balance in the market and reduce oil production.”