Trump sees output cut from Saudis, Russia: Update

President Donald Trump said he expects and "hopes" that Saudi Arabia and Russia will be cutting oil output by 10mn-15mn bls, following discussions with the leaders of two Opec+ members.

Trump announced the possible cuts today through a Tweet, after talking with Saudi crown prince Mohammad bin Salman, who he said had spoken with Russian president Vladimir Putin. The White House has not provided further details, such as the timing of the output cut or if the amount would be 10mn-15mn bls or the far larger amount of 10mn-15mn b/d.

"I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!" Trump said in a post on Twitter. He added the cut "could be as high as 15 Million Barrels."

Brent prompt-month crude futures briefly surged past $33/bl on the news, up from $26/bl earlier in the day, but dropped to $30/bl as further details trickled out that have raised questions about the likelihood of such production cuts.

Putin, Saudi talks denied

The Kremlin denies there was a conversation between the crown prince and Putin. Putin's spokesman told state-run newswire RIA Novosti there was "no such conversation," after Trump said the conversation occurred.

Saudi Arabia today called for an urgent meeting of Opec+ members with the goal of seeking a "fair solution to restore a desired balance of the oil markets," according to the government-owned press agency SPA. But the statement said the meeting should involve a "group of other countries," suggesting output cuts might need support from other producers. The US in 2019 was the world's largest oil producer.

Trump late yesterday said he was "confident" the two Opec+ members would reach a deal on oil production, in response to a price collapse that has upended global markets. Trump declined to offer specifics on what an agreement would entail, or if the US would need to make its own commitments on lower production.

"If they are unable to solve it, then I think I know what to do to solve it," Trump said. "We will not mention it now, but it is tough."

US shale producers have floated the idea of reinstating policies to restrict oil production in Texas. Former US energy secretary Rick Perry earlier this week said his advice to Trump would be to ban foreign crude imports for 60-90 days. But large oil producers and refiners oppose the idea.

The American Petroleum Institute and the American Fuels & Petrochemical Manufacturers said yesterday in a letter to Trump such a move would "jeopardize gains" in energy dominance in the US.

Russia not ruling out talks

Russian energy minister Alexander Novak earlier today said he did not rule out resuming talks with Saudi Arabia, and said there was no incentive for Russia to boost production now.

"Everyone is suffering now", Novak said on Echo of Moscow radio. "Russia does not increase production now as there is no economic sense."

Asked if Russia would seek to revive talks with Saudi Arabia and other members of the Opec+ coalition, Novak said: "This is one of the options and we do not rule out it if becomes necessary". But he said no ministerial-level talks have taken place.

After the Opec+ agreement on production restraint broke down in early March, Novak said that Russia could increase production by 200,000-300,000 b/d and had the potential to add 500,000 b/d.

Those comments were made after Saudi Arabia's state-controlled Aramco said it would boost its supplies to its international and domestic customers to 12.3mn b/d of crude in April. This provoked a sharp fall in the price of crude, which has since been exacerbated by measures taken to prevent to spread of the coronavirus epidemic.

By Chris Knight, David Ivanovich and Ben Winkley