The OPEC+ coalition is pushing for other major oil producers to join it in a deep reduction of global crude output and stem the historic rout in prices, a move that sent futures sharply higher.

A global cut of 10 million barrels a day is a realistic goal, according to a delegate, who spoke on condition of anonymity. The Organization of Petroleum Exporting Countries and allies, a group led by Saudi Arabia and Russia, has already scheduled a virtual meeting on Monday and wants other nations to join talks as soon as possible.

The 10 million figure was first touted by President Donald Trump on Thursday, who called for a coordinated production cut. He gave no indication whether the U.S. would take part. For Saudi Arabia, it’s essential that producers including the Americans join in.

Trump is meeting oil executives later on Friday. Russian President Vladimir Putin is meeting his country’s oil executives too.

Oil surged on the news. But there are enormous obstacles to any deal. Russia was quick to deny on Thursday that any agreement had been reached -- although it had said for weeks it’s open to talks. Even if an accord can be struck, a cut of 10 million barrels would barely dent the glut of oil that has been created by the economic fallout of the coronavirus pandemic. Traders estimate the lost demand could be as high as 35 million barrels a day.

And so far, there is no sign of any movement toward a truce in the ground war. Saudi Arabia is ramping up exports, as it promised to do.

But diplomatically the picture is more nuanced. For several days, Saudi Arabia was wrong-footed by Russia, as Moscow sounded open to talks and blamed the price collapse on the kingdom. Now, by saying it’s ready to cut, the kingdom has put the onus on Moscow, forcing the Kremlin to reverse their opposition to cuts, or be blamed -- by Trump among others -- for the damage.

Oil Jumps

Brent crude, which jumped more than 40 per cent on Thursday after Trump’s announcement before paring gains, rose 11 per cent on Friday. It’s still down 50 per cent this year as the virus fight grounds planes and shutters huge swaths of the global economy.

In some corners of the market, physical prices have gone negative and some producers are expected to start suspending output as there’s not enough space to store the excess crude. Tankers have filled up fast as ships are being used as storage rather than transport.

Oil-producing nations around the world are feeling the pain of the price war, which started a month ago after Russia refused to take part in deeper cuts, saying it would only extend the previous deal. Saudi Arabia aggressively discounted its crude days later, in a move to seize customers from Russia’s traditional markets.

Shale producers in the U.S. are struggling and national finances are under pressure. Russia, for example, is now expecting oil prices at US$20 a barrel this year and will ramp up borrowing to make up for a budget shortfall.

Saudi Arabia will also have to make deep budget cuts as oil accounts for the vast majority of its revenue. The kingdom’s next move in the price war could come as soon as Sunday, when it sets official prices for its crude exports. The operation could be postponed, however -- as it was last month -- to avoid prejudicing the Monday meeting.

Washington’s Options

Trump will meet on Friday oil executives, who are battling among themselves as to what the administration should do.

The White House has considered tariffs on foreign oil imports to protect U.S. producers, though the idea is opposed by some top Trump advisers led by Larry Kudlow, the director of the National Economic Council, according to people familiar with the matter.

The idea of a U.S. production cut, probably executed by capping exports, is also on the table at the White House, though many oil industry representatives have warned that the approach would cause the U.S. to cede the very “energy dominance” Trump has repeatedly celebrated.

Trump said on Thursday he expected a deal -- but made no mention of any role for the U.S.

“It would be great for Russia, it would be great for Saudi Arabia -- I hope they make that deal but that’s what they told me,” he said. “Can something happen where it doesn’t happen? I guess? In which case there’s another alternative, but I’d rather not see the other alternative.”

In his tweet, Trump said he had spoken to Crown Prince Mohammad bin Salman, who had in turn spoken with Putin. But a Kremlin spokesman, Dmitry Peskov, said the conversation hadn’t happened and that no production cut had been agreed to with the Saudis.

Russia hasn’t yet confirmed its attendance at the OPEC+ meeting. But Russia has long said it’s open to talks, and the industry may find itself forced into production cuts anyway because of the slump in demand, potentially bolstering the case for a coordinated response.

--With assistance from Dina Khrennikova, Salma El Wardany, Javier Blas and Paul Burkhardt.