Global oil prices extended gains Friday amid reports that OPEC producers, as well as Russia, are set to hold an emergency teleconference next week to discuss the production cuts suggest yesterday by President Donald Trump.
Trump triggered a 20%-plus surge in crude prices Thursday when he Tweeted that Russia and Saudi Arabia, the world's second and third largest producers, would cut their output by between 10 million and 15 million barrels. However, he also ignited confusion by failing to add how and when the cuts would be made, given that 15 million barrels would be more than half of their combined daily output - and some 15% of the entire global supply.
It was also suggested there was a political edge to his Tweet, given that he is planning to meet U.S. energy executives later today, and over the weekend, at the White House amid an historic collapse in global crude prices, which have fallen more than 58% so far this year triggered by production increases, slowing demand and the coronavirus pandemic
OPEC's last attempt to broker a production cut of just 1.5 million barrels per day across its entire membership collapsed last month in Vienna, triggering the largest weekly declines on record and the worst first quarter slide in crude prices in at least a generation.
"It is difficult to see the current OPEC+ group cutting output by at least 10 million barrels per day - the scale of the reduction would be just too much for the group to handle," said ING's head of commodity strategy Warren Patterson. "Therefore, if a deal is to materialise, and one of this size, it would require the involvement of further producers. This would include countries like Canada, Brazil and in particular the US."
"This is where it becomes more difficult, as getting the US oil industry to agree on production quotas will be a tough ask, and is also unlikely to gel with US antitrust legislation," he added.
Brent crude futures contracts for June delivery, the benchmark reference for around 60% of global crude purchases, were last seen $4.89 higher from their Thursday closing price in New York and changing hands at $34.83 per barrel in early European trading, a move that marks a near 30% increase from yesterday's morning levels.
WTI crude futures for May delivery, which are more tightly connected to domestic gas prices, were marked $3.16 higher at $28.48 per barrel.
Saudi Arabia, the world's second-largest producer behind the United States, was set to pump a record 12.3 million barrels of crude each day, starting this month, following the collapse of its output limit agreement with OPEC cartel members and Russia in early March.
That surge in output, as well as the ongoing slump for global oil prices amid the coronavius-lead recession, has made drilling in the Permian Basin, a major source of shale deposits that could provide as many as 150 million barrels of oil over the next few decades, economically unviable.
The break-even price for U.S. crude, in order to justify the expense of new drilling projects in the region, needs to hover between $40 and $50 per barrel, most analysts estimate.
WTI crude last traded above $50 a barrel in early February, and has fallen more than 58% from its $61 peak at the start of the year.
In fact, the low prices have made overseas sales almost impossible fur U.S. producers, with the Energy Department Wednesday reporting a 13.8 million barrel increase in domestic crude stocks, the largest since 2016.