OPEC and its allies are working on a deal for an unprecedented oil production cut equivalent to around 10% of global supply, an OPEC source said, after the U.S. president called on producers to stop the market rout caused by the coronavirus pandemic.

The meeting of OPEC and allies such as Russia has been scheduled for April 6, but details were thin on the exact distribution of production cuts. No time has yet been set for the meeting, OPEC sources said.

A global deal to reduce production by as much as 10 million to 15 million barrels per day would require participation from nations that normally have not exerted regulatory control over output, including the United States, now the world’s largest producer of crude.

Russian President Vladimir Putin said on Friday that his country was ready to cut production along with OPEC and the United States, while still blaming Saudi Arabia for the market’s collapse.

Oil prices have fallen to around $20 per barrel from $65 at the start of the year as more than 3 billion people went into a lockdown because of the virus, reducing global oil demand by as much as a third, or 30 million barrels per day. The coronavirus has infected 1 million people worldwide and killed more than 53,000.

Trump said on Thursday he had spoken with both Putin and Saudi Crown Prince Mohammed bin Salman. However, he said he did not make any concessions to Saudi Arabia and Russia, such as agreeing to a U.S. domestic production cut - a move forbidden by U.S. antitrust legislation. Some U.S. officials have suggested U.S. production was set for a steep decline anyway because of low prices.

Trump was scheduled to meet with U.S. oil producers on Friday afternoon. OPEC producers, along with Russia, are waiting to see if the United States commits to any efforts to stabilize the markets, two OPEC sources said.

“The U.S. needs to contribute from shale oil,” an OPEC source said. Russia has long expressed frustration that its joint cuts with OPEC were only lending support to higher-cost U.S. shale producers.

Russia’s energy minister, Alexander Novak, told Russian state media that he understands the United States has legal restrictions on output cuts, but it should still be flexible.

The International Energy Agency warned on Friday that a cut of 10 million barrels per day would not be enough to counter the huge fall in oil demand. Such an output cut would still result in a 15 million barrel per day increase in inventories in the second quarter, said Fatih Birol, the head of the agency.

White House economic adviser Larry Kudlow said Trump will fight any international collusion in energy markets that would hurt U.S. producers, but the administration cannot dictate to oil producers.

“I think ... oil companies, seeing a decline in price are going to pull back on production. That’s just common sense,” he said, adding that he sees no reason why Trump’s talks with Saudi Arabia and Russia on oil will not “bear fruit.”

A second OPEC source said any cut must include producers from outside OPEC+, an alliance which includes OPEC members, Russia and other producers, but excludes oil nations such as the United States, Canada, Norway and Brazil.

Canadian Prime Minister Justin Trudeau said he has had direct communication with OPEC and the United States. The Norwegian oil and energy ministry declined to comment on Friday on whether Western Europe’s largest producer could cut its oil output to help support prices.

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.

OIL PRICES RECOVER, FOR NOW

Oil prices recovered from the lows of $20 per barrel this week with Brent trading near $33 per barrel on Friday, still half its $66 closing level at the end of 2019.

Prices plunged in early March after Russia and Saudi Arabia could not come to an agreement to curb output. The Saudis shocked the oil industry with an aggressive series of steps to take back market share that included cutting export prices, pumping at maximum production and trying to sell cheaper oil to refiners that buy Russian crude.

The oil market was dealt a heavier blow by the freefall in demand due to the coronavirus pandemic, which sent crude prices to their lowest levels since 2002, hitting budgets of oil-producing nations and slamming the U.S. shale oil industry, which cannot compete at low prices.

The oil-price crash 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.

Major global producers have already scaled back production with or without OPEC, as fuel demand has dropped precipitously and storage is rapidly filling. This past week, U.S. drillers idled more rigs in one week than at any time in the last five years. (Reuters)

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