Oil surged on the prospect that an idea first touted by U.S. President Donald Trump on Thursday looked to be gaining some traction.

As the coronavirus decimates demand for crude, the impact of low prices is reverberating around the world — threatening the budgets and political stability of oil-dependent nations, the existence of the U.S. shale industry, and jobs in an industry already in turmoil.

There are still massive obstacles to a deal: There’s no indication that Trump will bow to Saudi demands that the U.S. join the cartel in what would be an unprecedented global maneuver. But Russia’s oil industry is now ready to cut, according to people familiar with the situation, and a meeting of OPEC+ members that Saudi Arabia wanted has been hastily scheduled for Monday.

A global cut of 10 million barrels a day is a realistic goal, according to a delegate who spoke on condition of anonymity. That figure was first mentioned by Trump on Thursday as he called for a coordinated production cut. Yet the International Energy Agency, which advises major economies, signaled deeper curbs would be needed to stabilize the market.

Adding U.S.

A deal with non-OPEC+ nations including the U.S. would set a historic precedent. The Organization of Petroleum Exporting Countries has been managing supply since 1960, but its power has waned since the shale revolution turned the U.S. from importer to major producer. IEA head Fatih Birol said Saudi Arabia should organize a G20 meeting to address the glut.

So far, in the ground war, there is no sign of any movement toward a truce. Saudi Arabia is ramping up exports, as it promised to do.

But diplomatically it’s a different picture. For several days, Saudi Arabia had been wrong-footed by Russia, as Moscow sounded open to talks and blamed the price collapse on the kingdom. Subsequently, by saying it’s ready to cut, the kingdom put the onus on Moscow, forcing the latter to reverse its opposition to cuts to avert any blame for the damage. There’s still no official word from the Kremlin on its position.

It’s a battle of wills — and egos — between Putin and Saudi Crown Prince Mohammed bin Salman. And watching, trying to force them into a deal without committing too much himself, is Trump.

Later on Friday, the U.S. president will meet with oil executives, who are battling among themselves as to what the administration should do. His Russian counterpart, Vladimir Putin, is also meeting his country’s oil-industry bosses.

Big Enough?

Even if an accord can be struck, a cut of 10 million barrels a day would barely dent the glut of oil that has been created by the economic fallout from the pandemic. Traders estimate the lost demand could be as high as 35 million barrels a day.

A 10 million-barrel reduction “may be a good start,” Birol said in an interview on Friday. Nevertheless, “in the second quarter we may well see a stock build of over 15 million barrels a day. This is the reason, I think, we need to do more.”

Brent crude, which surged on Thursday after Trump’s announcement, rose as much as 17% on Friday. It’s still down almost 50% this year as the virus fight grounds planes and shutters huge swaths of the global economy.

In some corners of the market, physical prices have gone negative and some producers are expected to start suspending output as there’s not enough space to store the excess crude. Tankers have filled up fast as ships are being used as storage rather than transport.

Painful Price War

For many in the petroleum industry, Saudi Arabia and Russia have no choice but to cut.

“In our view there is no OPEC+ choice involved, the rhetoric is window-dressing, the market will deliver cuts,” said Paul Sankey, a veteran oil analyst at Mizuho Bank Ltd.

Oil-producing nations around the world are feeling the pain of the price war, which started a month ago after Russia refused to take part in deeper cuts. Saudi Arabia aggressively discounted its crude days later, in a move to seize customers from Russia’s traditional markets.

Shale producers in the U.S. are struggling and national finances in multiple countries are under pressure. Russia, for example, is now expecting oil prices at $20 a barrel this year and will ramp up borrowing to make up for a budget shortfall.

Saudi Arabia will also have to make deep budget cuts as oil accounts for the vast majority of its revenue. The kingdom’s next move in the price war could come as soon as Sunday, when it sets official prices for its crude exports. The operation could be postponed, however — as it was last month — to avoid prejudicing the Monday meeting.

Washington’s Options

The White House has considered tariffs on foreign oil imports to protect U.S. producers, though the idea is opposed by some senior Trump advisers led by Larry Kudlow, the director of the National Economic Council, according to people familiar with the matter.

The idea of a U.S. production cut, probably executed by capping exports, is also on the table at the White House, though many oil industry representatives have warned that the approach would cause the U.S. to cede the very “energy dominance” Trump has repeatedly celebrated.