Next Week, Oil Set To Digest The Results Of OPEC+ Meeting

The price of fuel outside a Sullivan's gas station in Princeton Illinois the United States where shale producers are hurting and some analysts warn that no deal OPEC can make can ease the pain of an unprecedented demand sap and growing glut [Daniel Ack

Crude Oil Remains Volatile As Producers Struggle To Finalize Cuts

The US was invited to Thursday's Opec+ talks but it was not clear if it joined the video conference.

They said the cuts included contributions of up to 5 million bdp from producers outside their group known as OPEC+ and could be made gradually, potentially overcoming resistance from the United States, whose involvement is seen as vital to win broad backing for an agreement.

U.S. WTI prices closed below $23 per barrel, a level which drives most of the American oil industry into losses.

Crude oil made a run higher into the holiday weekend, gaining almost 4% on Thursday, before pulling back from an earlier spike as investors await more news on negotiations between major producers who are finalizing an agreement to slash record amounts of oil in response to the global fuel demand collapse that has resulted from the coronavirus pandemic.

In a sign that Opec+ was struggling to win broader support, Canada's main oil province, Alberta, said output had already dropped and that it had not been asked by Opec for more cuts.

A spat between Russian Federation and Saudi Arabia that saw them boost production also contributed to the fall, which saw global benchmark Brent crude slide under $25 a barrel.

OPEC+ documents showed the group plans to collectively cut by 10 million bpd in May to June.

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Expectations for the Opec meeting were high. "They gave out contracts and estimated that we would produce three million barrels a day but the truth is we have a production of 1.7 million barrels", said the president. President Trump last week had touted a possible supply cut on the order of 15 million barrels per day, although the deal apparently was for just 10 million. At current production rates, storage tanks will be full of oil sometime in May, and the only way to avoid filling them up would be to sustain the cuts through the end of the year, he said.

According to reports, and agreement to cut production between OPEC and its major friends, including Russian Federation, hit a snag after Mexico refused to agree to its share of the cuts after a grueling nine-hour marathon meeting between the parties. The province said it backed the U.S. idea for tariffs on imported crude. "India has always advocated a stable oil market, which is reasonable for producers and affordable for consumers..."

"Desire was confirmed for coordination of actions aimed at the stabilization of the global oil trade situation and the mitigation of the negative impact from volatile oil prices on the global economy", the Kremlin said following the call with other producers.

In the time since, prices have collapsed. Global benchmark Brent crude was around $32 a barrel as of Friday while the US benchmark West Texas crude closed under $23.

Even if prices rise in the short term, "we believe the enthusiasm will subside at some point and the reality of the size of the demand's imbalance will eventually hit the market", Bjornar Tonhaugen, head of oil markets for Rystad Energy, told CNBC.

Thursday's Opec+ talks will be followed by a call on Friday between energy ministers from the G20 major economies, hosted by Saudi Arabia. If successful, the 15 million barrel per day reduction would represent an unprecedented production rollback.

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