By James Thornhill and Alex Longley
While the talks still face significant obstacles, not least agreeing on numbers everyone can live with and potential U.S. involvement, the bigger question is whether any deal will be enough given the extent to which the virus is destroying demand. Stockpiles at the U.S. storage hub of Cushing, Oklahoma, may have risen the most last week since at least 2004, while Indian buyers are looking to cancel some April and May oil shipments.
“Judged by the bout of optimism reflected in prices of oil futures in recent days, the market is still not realizing the severity of the oversupply problem coming in April-May,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
An effective deal will require all of the three top producers — the U.S., Saudi Arabia and Russia — to participate. While Riyadh and Moscow are set to cut output significantly, according to people with knowledge of the negotiations, Washington is more likely to offer up gradual reductions. The G-20 may be a more acceptable forum to bring on board the U.S. and other big producers outside the OPEC+ alliance, such as Canada and Brazil.
Meanwhile, some old-guard Texas oil drillers are urging state regulators to clamp down on crude output. The largest U.S. oil-producing state hasn’t restricted production in almost 50 years but a growing chorus of explorers and related industries are advocating just such a move.