Despite press reports of disagreements, there is considerable progress in organizing producing countries for a global agreement on production cuts.
It appears likely that the OPEC+ meeting scheduled for Monday may be moved to Thursday, April 9 or Friday, April 10 for logistics and optics reasons. The central reason behind the date change is to accommodate many non-OPEC+ countries that want to participate and the original Monday date was too soon for most.
Markets may view the potential date change as negative for prices when trading opens in Asia Sunday night but the move is actually positive news. It's also possible that there will be two stages with an OPEC only meeting will be held on Monday and the larger group meeting later in the week.
The objective remains for cuts of at least the 10 million barrels per day (b/d) that President Trump tweeted on Thursday.
Additionally, there was concern by the US and other countries about the optics of participating in the OPEC+ framework so we believe the convening authority will likely be the G20, chaired this year by Saudi Arabia, and perhaps with assistance by the International Energy Forum (IEF).
Fatih Birol, Executive Director of the International Energy Agency (IEA), suggested the G20 framework in calls on Friday to the US Energy Secretary and Saudi Energy Minister, and it appears this recommendation is being adopted.
US Energy Secretary Dan Brouillette spoke by phone Saturday with Saudi Energy Minister Prince Abdulaziz bin Salmon (ABS), and we expect the US will participate in the broader G20 producer discussions.
Canada and Mexico have indicated to the Trump Administration that they will participate in the cut talks.
On Sunday night, there will be a call between Saudi Arabia, Kuwait, UAE and possibly Iraq to discuss cuts levels to contribute.
We believe Aramco and other gulf countries OSP and nominations will be delayed a few days for the producer meeting.
Trump Meeting with Energy CEOs
President Trump met in person with Energy Company CEO’s Friday afternoon at The White House with several Senators from energy producing states. While many participants suggested ideas such as Jones Act waivers, tariffs on Saudi and Russian crude imports and direct Treasury loans like the airlines received in the recent CARE act, we think the Administration is unlikely implement such measures.
Instead, the Administration focused in the meeting on its diplomatic effort to bring Saudi Arabia and Russia back to the negotiating table and reversing the production free-for-all after the collapse of the OPEC+ deal on March 6.
We are told the Senators attending the meeting were focused exclusively on Saudi Arabia changing course on the price war and “flooding oil markets.” Senator Ted Cruz (R-Texas) attended the meeting and made similar comments to recent media interviews about passing legislation to withhold military support for Saudi Arabia if the Kingdom continues the price war.
New Russia–Saudi Blame Game
Tensions between Saudi Arabia and Russia got more intense today after President Putin’s comments Friday that Saudi Arabia started the price war to hurt US shale.
Anyone who attended the OPEC meeting, including energy ministers of dozens of countries and the media, know that Russia refused to agree to a new OPEC deal with US shale as its target.
The problem for Russia is that prices have dropped much greater than even those officials who lobbied the government to abandon the deal.
It seemed like an odd time to throw a grenade here as both sides will inevitably need to cooperate but the ways of Kremlinology are mysterious.
Saudi Arabia is tremendously offended by Putin’s comments and the bad blood between the two producers is certain to continue.
But the blame game is a side-show. We think both countries’ interests are aligned now to agree on cuts.
Due to Trump’s call to Putin, Secretary Brouillette is now in close contact with his Russian counterpart Minister Alexander Novak. We believe Russia will contribute cuts of at least 1 million b/d. The US will work closely to make sure Russia participates in the global cut discussions.
