* Trump says cuts of 10-15 mln barrels per day possible
* Saudi Arabia calls emergency OPEC meeting
* Oil prices surge, give back some gains
* Fuel demand has slumped on coronavirus outbreak
(Adds comment from Texas regulator)
By Rania El Gamal, Vladimir Soldatkin and Jeff Mason
DUBAI/MOSCOW/WASHINGTON, April 2 (Reuters) - U.S. President
Donald Trump said on Thursday he had brokered a deal with top
crude producers Russia and Saudi Arabia to cut output and arrest
an oil price rout amid the global coronavirus pandemic, though
details of how cuts would work were unclear.
Trump said the two nations could cut output by 10 to 15
million barrels per day (bpd) - an unprecedented amount
representing 10% to 15% of global supply, and one that would
require the participation of nations outside of OPEC and its
allies.
A senior U.S. administration official familiar with the
matter said Trump would not formally ask U.S. oil companies to
contribute to the production cuts, a move forbidden by U.S.
antitrust legislation.
Russia and Saudi Arabia have been at odds since early March,
when they failed to agree on a deal curbing output as the
coronavirus spread around the globe. The pandemic has worsened
since, freezing economic activity and sending oil prices into a
tailspin as producers confronted the prospect of a dramatic fall
in demand along with a flood of unwanted oil supply.
"It's a very needed and necessary step - nothing works at
$20 oil. Physically, the tap has to get turned off," said Brian
Williams, partner at Carl Marks Advisors, a merchant banking
firm.
Saudi Arabia, the de facto head of OPEC, called on Thursday
for an emergency meeting of OPEC and non-OPEC oil producers, an
informal grouping known as OPEC+, state media reported, saying
it aimed to reach a fair agreement to stabilize oil markets.
Trump is separately set to meet with U.S. oil industry
executives on Friday.
Trump said he spoke with both Russian President Vladimir
Putin and Saudi Crown Prince Mohammed bin Salman on Thursday. "I
expect & hope that they will be cutting back approximately 10
Million Barrels, and maybe substantially more which, if it
happens, will be GREAT for the oil & gas industry!" Trump wrote
on Twitter.
"Trump's call to Putin has changed everything," one OPEC+
source said, adding that initial talk among the group was about
how other large producers such as Canada and Brazil would need
to join in any coordinated output cuts.
Jason Kenney, the premier of Alberta, Canada's primary
oil-producing province, said on Thursday that Alberta was open
to joining a production-cut deal, though he said, "It's the
Saudis and the Russians here who are the problem." Canada
produces roughly 4 million barrels of oil every day.
Global oil demand is expected to fall by about 30 million
bpd in April, or about one-third of daily consumption. Some 3
billion people around the world have been put on lockdown to
slow the spread of coronavirus, which has sickened 1 million
people worldwide and killed nearly 50,000.
The immense decline in demand sent oil prices to their
lowest levels since 2002, close to $20 per barrel, hitting
budgets of oil-producing nations and dealing a huge blow to the
U.S. shale oil industry, which cannot compete at low prices.
The downward pressure has been exacerbated by the battle for
market share between Russia and Saudi Arabia. Russia rejected
the Saudi proposal last month to take supply off the market in
part because it has cut its own output for years while U.S.
production grew to a record 13 million bpd, gobbling up market
share.
Russian Energy Minister Alexander Novak said on Thursday
that Moscow was no longer planning to raise output and was ready
to cooperate with OPEC and other producers to stabilize the
market.
It was not clear when Saudi Arabia's proposed emergency OPEC
meeting could be held.
A meeting could represent a thaw in Saudi-Russia tensions. A
senior Gulf source familiar with Saudi thinking told Reuters
that Russia's opposition to its proposal to deepen output cuts
was the cause of market turmoil.
At the time of the deal's collapse, OPEC and its allies were
collectively cutting output by about 1.7 million bpd - making a
10-to-15 million-bpd cut a big hurdle unless it brought in other
major producers.
The swift and aggressive Saudi response to the collapse of
the OPEC+ deal shocked the oil industry. The kingdom slashed
export prices, opened the taps to pump at maximum production and
tried to sell cheaper oil to refiners that buy Russian crude.
OUTPUT CUTS
Major global producers have already scaled back production
as fuel demand has dropped precipitously and storage is rapidly
filling. Brazilian state-run oil producer Petrobras has already
cut output by 200,000 barrels per day, about 6 percent of its
output, in response to what its chief executive called the
"worse oil industry crisis in 100 years."
U.S.-based Chevron Corp and BP Plc recently
said they would pump less oil from shale than previously
targeted.
The free-fall in prices has spurred regulators in the U.S.
state of Texas, the heart of the country's oil production, to
consider regulating output for the first time in nearly 50
years, while producers in neighboring Oklahoma asked state
regulators also to consider cuts Thursday.
Ryan Sitton, one of three elected oil-and-gas regulators in
Texas, spoke with Russia's Novak about a cut of 10 million bpd
in global supply. "This isn't good for anybody," Sitton told
Reuters. "We're talking about a destabilization of the global
energy market."
Brent oil prices rose 21% to $29.94 per barrel, having
earlier risen to as high as $36.29. U.S. benchmark WTI crude
settled up 25% to $25.32 a barrel.
Even with Thursday's surge, Brent is still less than half
its $66 closing level at the end of 2019.
(Reporting by Rania El Gamal in Dubai, Vladimir Soldatkin in
Moscow and Jeff Mason in Washington; additional reporting by
Jessica Resnick Ault and Laila Kearney in New York and Rod
Nickel in Winnipeg; Writing by Dmitry Zhdannikov and David
Gaffen; Editing by Tom Brown, Leslie Adler and Daniel Wallis)
