Apr 3, 2020 - Energy & Environment

The chaotic thaw in oil price wars

Ben Geman, author of Generate

Illustration: Sarah Grillo/Axios

Friday morning brought the news that the OPEC+ group will meet remotely Monday to discuss potentially steep production curbs, sending prices upwards on the prospect of easing the global glut as coronavirus crushes demand.

Why it matters: The meeting, reported by multiple outlets, is the second concrete sign in two days of new coordinated efforts since the OPEC+ supply management alliance — led by megaproducers Saudi Arabia and Russia — collapsed a month ago.

  • Yesterday Saudi Arabia called for a meeting of OPEC+ and other producers to "restore the desired balance to the oil markets."
  • Reuters, citing an OPEC source, said the OPEC+ group is debating a global supply cut of 10 million barrels per day.

But, but, but: There's still all kinds of hurdles and confusion!

  • There's plenty of uncertainty about Russia's posture. The Russian news agency Sputnik, quoting a spokesperson for President Vladimir Putin, reports that he will meet today with Russian oil company executives.
  • Bloomberg reports that Russia is ready to take action to halt the slide in oil prices.
  • And another wildcard is the push by Saudi Arabia for countries outside the group to join the production-cutting effort.
  • The kingdom's statement Thursday calling for an urgent meeting said it should include other countries.

Between the lines: Bloomberg reports that for the Saudis, "it’s essential that producers including the Americans join in."

  • But President Trump yesterday evening said that he had not agreed to U.S. production cuts — and indeed hadn't discussed it — in his recent oil talks with Russian President Vladimir Putin and the Saudi crown prince.
  • And the U.S. market system doesn't enable the kind of top-down control employed by the Saudis and others.
  • However, market forces are going to push down U.S. output. And regulators in states including Texas, the heart of the U.S. industry, can theoretically impose curbs.

The intrigue: This afternoon Trump is slated to meet with a group of U.S. oil executives from companies including ExxonMobil and Chevron, as well as big independent producers like Occidental and Devon Energy.

  • The Wall Street Journal reports that the outcome of the OPEC+ talks will be influenced by Trump's meeting.

What they're saying: "The administration will continue to engage with Russian and Saudi leadership, OPEC countries, and America’s energy industry to identify solutions that will help stabilize oil markets and the global economy," a senior Trump administration official tells Axios.

Meanwhile, prices surged yesterday morning after Trump tweeted the unsubstantiated claim that the Russians and Saudis were preparing for joint cuts of up to 15 million barrels per day.

  • They came back down as confirmation of Trump's tweets didn't arrive, but then rose this morning on news of the OPEC+ meeting that signals the prospect of action.
  • This morning the global benchmark Brent crude is trading at around $33.54, well above the lows in the $22 range a few days ago.

The state of play: The unprecedented demand collapse — not the supply picture — is the biggest force acting on oil markets right now. Even a potential international agreement on production will not send prices back to pre-pandemic levels.

  • Some analysts and experts say the travel and economic freezes could be knocking 30 million barrels per day or more off of global consumption.

What they're saying: "It's very positive that the world's top three oil producers are talking about stabilizing oil markets but demand declines from coronavirus impacts are casting a huge shadow in the oil sector," oil analyst Joe McMonigle tells S&P Global Platts.

  • But he adds that production cuts can "at least place some kind of catalyst in markets for a floor" on prices.

Go deeper: Coronavirus could drive down global oil consumption in 2020

Go deeper

Biden formally secures Democratic presidential nomination

Joe Biden speaks at Delaware State University's student cente on June 5. Photo: Jim Watson/AFP via Getty Images

Former Vice President Joe Biden became the formal Democratic presidential nominee on Friday evening, per AP.

The big picture: Biden has been the presumptive frontrunner to take on President Trump since Sen. Bernie Sanders suspended his campaign in early April.

Updated 10 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 9 p.m. ET: 6,724.516 — Total deaths: 394,018 — Total recoveries — 2,996,832Map.
  2. U.S.: Total confirmed cases as of 9 p.m. ET: 1,894,753 — Total deaths: 109,042 — Total recoveries: 491,706 — Total tested: 19,231,444Map.
  3. Public health: WHCA president says White House violated social-distancing guidelines to make reporters "a prop" — Jailing practices contribute to spread.
  4. Sports: How coronavirus could reshuffle the sports calendar.
  5. Jobs: Better-than-expected jobs report boosts stock market.
  6. Media: The Athletic lays off 8% of staff, implements company-wide pay cut.

Scoop: German foreign minister to travel to Israel with warning on annexation

Heiko Maas. Photo: Michael Kappeler/picture alliance via Getty Images

German Foreign Minister Heiko Maas is expected to travel to Israel next week to warn that there will be consequences if Israeli leaders move forward with plans to annex parts of the West Bank, Israeli officials and European diplomats tell me.

Why it matters: Israeli and European officials agree that if Israel goes ahead with unilateral annexation, the EU will respond with sanctions.