Global oil prices retreated in early trading Monday as OPEC leaders delayed an emergency meeting on production cuts in order to allow Russia and Saudi Arabia more time to broker a deal that could stabilize markets and satisfy President Donald Trump.
Trump prodded the world's two biggest producers last week with a Tweet that suggested the pair would make massive cuts to their daily production totals in an effort to thwart an ongoing collapse in crude prices that has decimated the global energy industry.
Officials from Moscow and Riyadh, however, have yet to agree terms of any production cuts, and are struggling to find common ground following the collapse of a three year output limit agreement among OPEC members and their allies last month in Vienna.
Meanwhile, Trump has said he'll slap "very substantial" tariffs on non-U.S. oil imports if the pair aren't able to reach an agreement, or bring other OPEC members into a collective production cut limit.
"If I have to do tariffs on oil coming from outside or if I have to do something to protect our tens of thousands of energy workers and our great companies that produce all these jobs, I'll do whatever I have to do," Trump told reporters late Sunday after weekend meetings with energy executives at the White House.
Brent crude futures contracts for June delivery, the benchmark reference for around 60% of global crude purchases, were last seen $1.08 lower from their Friday closing price in New York and changing hands at $33.03 per barrel in early Monday trading, following last week's near 32% increase, the largest since the contract was established in the early 1980s.
WTI crude futures for May delivery, which are more tightly connected to domestic gas prices, were marked $1.42 lower at $26.92 per barrel, after trading below $20 for the first time in more than 18 years on Monday of last week.
"Faced with a massive loss of demand and increased risk of running out of storage the current market action is based on hope more than fundamentals," said Saxo Bank's chief investment officer Steen Jakobsen. "OPEC+ is tentatively scheduled to hold a virtual meeting on Thursday. Its success will based on the ability to reach out to non-OPEC+ members such as the US, Canada and Norway."
U.S. participation in an output cut agreement, however, could be tested by antitrust regulations, although some experts have said that government officials could order the cuts directly in order to skirt existing legislation.
U.S. drillers, however, have already started to trim investment, with the key Baker Hughes rig count last week showing the steepest decline in domestic drilling installations in at least five years.
Domestic inventories, as well, have been increasing steadily amid a dearth in global demand amid the coronavirus-triggered recession, with the Energy Department reporting the biggest weekly rise --13.8 million barrels -- since October 2016.
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.
That surge in output, as well as the ongoing slump for global oil prices, 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 analyst estimate.