Donald Trump’s claim that oil producers are going to make big cuts in output has helped propel crude prices back above $30 a barrel, from an 18-year low. Brent, the international benchmark, is up 35 per cent over the past two days. Saudi Arabia, meanwhile, has convened an emergency meeting of the expanded Opec+ group, which includes Russia, in an indication that it could be ready to end the price war that hascontributed to the halving of oil prices in the last month. But analysts wonder whether a global deal can really be done – and whether it will make much difference to the outlook for the market, in the face of corona virus.
Mr Trump, the US president, claimed there was a deal between Saudi Arabia and Russia to cut oil supplies by 10m to 15m barrels a day. That would be by far the biggest cut in the history of Opec. Opec+ is preparing to meet on Monday – online – and with coronavirus having helped to push oil demand down by as much as a third, or more than 30m barrels a day, there is a strong incentive to reach some sort of agreement.
The oil industry has never faced a collapse in demand of the magnitude inflicted by this disease, and is ill-equipped to cope. While production remains rampant, storage tanks could be filled within weeks, forcing a disorderly and damaging shutdown of production.
US shale oil producers have been particularly hard-hit. Whiting Petroleum, a Denver-based group, declared bankruptcy this week. Yields on bonds issued by rival producers have soared, as investors expect more to go bust. That has led to a prospect that was once unthinkable – the US partaking in some form in a co-ordinated cut with rival producers.