Saudi, Russia outline record oil cut under U.S. pressure as demand crashes

Discussions among top global energy ministers will resume on Friday.

OPEC, Russia and other allies outlined plans on Thursday to cut their oil output by more than a fifth and said they expected the United States and other producers to join in their effort to prop up prices hammered by the coronavirus crisis. But the group, known as OPEC+, said a final agreement was dependent on Mexico signing up to the pact after it balked at the production cuts it was asked to make, Reuters said. Discussions among top global energy ministers will resume on Friday. The planned output curbs by OPEC+ amount to 10 million barrels per day (bpd) or 10% of global supplies, with another 5 million bpd expected to come from other nations to help deal with the deepest oil crisis in decades. Global fuel demand has plunged by around 30 million bpd, or 30% of global supplies, as steps to fight the virus have grounded planes, cut vehicle usage and curbed economic activity.

An unprecedented 15 million bpd cut still won't remove enough crude to stop the world's storage facilities quickly filling up. And far from signalling any readiness to offer support, U.S. President Donald Trump has threatened Saudi Arabia if it did not fix the oil market's problem of oversupply. Trump, who has said U.S. output was already falling due to low prices, warned Riyadh it could face sanctions and tariffs on its oil if it did not cut enough to help the U.S. oil industry, whose higher costs have left it struggling with low prices. A White House aide said Trump held a call with Russian President Vladimir Putin and King Salman of Saudi Arabia about the talks, after a U.S. official said the OPEC+ move towards cuts sent an “important signal” to the market. Officials from the Organization of the Petroleum Exporting Countries and Russia have said the scale of the crisis required involvement of all producers. OPEC+ would cut output by 10 million bpd in May to June, OPEC+ documents showed. All members would reduce output by 23%, with Saudi Arabia and Russia each cutting 2.5 million bpd and Iraq cutting over 1 million bpd. Under the plans, OPEC+ would then ease cuts to 8 million bpd from July to December and relax them further to 6 million bpd from January 2021 to April 2022, the documents showed.