Global benchmark oil prices are expected to open lower on Monday as a dispute between top crude exporters Russia and Saudi Arabia raises concerns of another collapse in talks to curb production at a meeting this week.
Crude futures surged for a second day on Friday, with both U.S. and Brent contracts posting their largest weekly percentage gains on record due to hopes that a global deal to cut crude supply worldwide would be struck at talks, which are now set for April 9.
The sharp rebound from weeks of losses came after U.S. President Donald Trump said Moscow and Riyadh would negotiate to end a price war that slashed prices by more than half last month. “Given the slimmer chances of a deal, prices are likely to give up the gains made last week that were a short-covering rally induced by Trump’s comments,” said Amrita Sen, co-founder of the Energy Aspects consultancy.
OPEC and its allies are working on a global agreement for an unprecedented oil production cut equivalent to around 10% of worldwide supply in what they expect to be a global effort including countries that do not exert state control over output, such as the United States.
Trump has, however, made no commitment to take the extraordinary step of persuading U.S. companies to cut output.
Per Magnus Nysveen, head of analysis at Rystad Energy, said the decline in global demand due to the coronavirus pandemic and the global lockdowns was larger than the proposed cuts by the OPEC+ alliance.
“It is not strange for the market to hike prices by enthusiasm such as Friday’s, but for the levels to stay stable for more than a day or two, it takes concrete developments and deals on the ground,” he said.
On Friday, Brent crude futures rose 13.9%, or $4.17 a barrel, to settle at $34.11. U.S. West Texas Intermediate (WTI) crude CLc1 rose $3.02, or 11.93% to settle at $28.34.
OPEC and its allies postponed an emergency meeting, led by Saudi Arabia, where the oil cuts could be agreed upon. A senior Saudi source told Reuters on Sunday, that the kingdom would host the meeting via video conference on April 9 and the delay was to allow more time to bring other producers on board.
Saudi Aramco will delay the release of its crude official selling prices (OSP) for May until April 10 to wait for the outcome of a meeting between OPEC and its allies regarding possible output cuts, the Saudi source said.
“As Aramco seems to have postponed the release of their official selling prices for May, it seems the kingdom still believes an oil production cut deal is possible,” said UBS commodities analyst Giovanni Staunovo.
“The biggest challenge remains how to split up those cuts among producers, particularly if U.S. oil producers will not join with voluntary cuts.”
Source: Reuters (Writing by Rania El Gamal; Editing by Pravin Char)