But the cartel undercut that argument last month by adding to the considerable market mayhem. OPEC leader Saudi Arabia and oil ally Russia duked it out in a price war that eventually helped send crude crashing to 18-year lows.
Now OPEC has an opportunity to restore calm to oil markets experiencing historic levels of volatility. But it won’t be easy.
President Donald Trump dramatically raised expectations for significant output cuts. Trump said last Thursday he hopes and expects Saudi Arabia and Russia will slash production by 10 million to 15 million barrels per day.
“Given that the oil market is now expecting a large reduction in output, anything less could send prices into freefall,” Caroline Bain, chief commodities economist at Capital Economics.
But no one wants to be the first to blink in this battle.
Saudi Crown Prince Mohammed bin Salman, tired of being the one taking the brunt of production cuts, wants other countries to join in. And there are reports that the United States, Canada and Mexico could be invited to this week’s meeting.
Output will naturally drop in the United States as high-cost drillers respond to the crash. And regulators in Texas are being urged to consider production limits — something that hasn’t happened in more than 40 years. But it’s unclear how such oil output could be limited at the national level.
Russia may finally agree to production cuts, with Vladimir Putin reportedly proposing Friday that global production get cut by 10 million barrels per day.
However, in exchange Moscow may insist on sanctions relief from Washington.
“There is a price for getting Russia back to the table. And it’s unclear Washington is willing to pay that price,” said Helima Croft, global head of commodity strategy at RBC Capital Markets.
In the end, even if all the pieces fall into place and a grand bargain is reached, it’s possible it will be too little, too late.
Demand is collapsing at an unprecedented rate and there’s little Putin, MBS and Trump can do about that.
Delta’s financial report could show airlines’ troubled fate
The loss will be narrower than some might expect: Travel was little affected in January and still strong domestically in February. But March, traffic ground to a near halt.
Monday: German industrial orders report
Wednesday: Delta Air Lines earnings
Thursday: US initial unemployment claims and University of Michigan consumer sentiment report for April
Friday: US Consumer Price Index inflation report