Prospect of deal between Russia and Saudi Arabia raises price of oil

Bloomberg:
Crude stabilized around $25 a barrel in Asia, after Thursday’s record gain, as doubts crept in over U.S. President Donald Trump’s claim that he had brokered a deal that would see Saudi Arabia and Russia slash production.

Futures in New York fell 1.4%, after surging almost 25% on Thursday in the biggest daily gain ever. Trump put a rocket under the market when he said on Twitter that he expected the two leading producers to slash output by as much as 15 million barrels. He didn’t specify that the cut would be per day, but markets interpreted the tweet as such. Saudi Arabia then said it had called a meeting of the OPEC+ alliance that includes Russia to discuss a “fair agreement,” signaling it would only cut output if others do so.

Still, doubts remain as to how close a deal really is. Trump said he had spoken to Saudi Prince Mohammed bin Salman, who had in turn spoken with Russian President Vladimir Putin, but a Kremlin spokesman said the conversation hadn’t happened and that no production cut had been agreed with the Saudis. One person familiar with the Trump administration’s discussions with the Saudis said there was widespread internal confusion about what the president meant by his tweet and that the figures he posted may not be reliable.

The U.S. crude benchmark has risen more than 16% this week, on track to break a run of five weekly declines.

If Trump meant 10 million barrels per day, that would equal both Moscow and Riyadh curbing almost 45% of their production in what would prove an unprecedented move. If collective action does remove that much from the market, that would be the equivalent of about 10% of world demand prior to the impact of coronavirus crisis.
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The state of Texas could also impose output cuts by using the Railroad Commission which regulates oil and gas drilling in the state. It would be the first time Texas imposed restrictions in about 50 years.

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