(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.
“This could of course be a very substantial development, even in view of the massive oversupply of 25 million barrels a day that the market is currently facing,” said Magnus Nysveen, head of analysis at industry consultant Rystad Energy. “Removing 10 million barrels a day from the supply side within weeks will contribute to balancing the market at a much more healthy level before the world runs out of crude storage capacity,” he said in an email, while adding that “it sounds too good to be true.”
Read more: Why OPEC-Russia Blowup Sparked All-Out Oil Price War: QuickTake
The prospect of the U.S. joining in on any output cuts was raised after Ryan Sitton of the Texas Railroad Commission, in a rare move for the state’s oil regulator, spoke with Russian Energy Minister Alexander Novak on reducing global supplies by 10 million barrels a day. He said he would also talk to the Saudi oil minister soon.
China is moving forward with plans to buy up oil for its emergency reserves after an epic price crash, according to people with knowledge of the matter, in another potentially positive sign for demand.
©2020 Bloomberg L.P.
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