Oil prices slip as investors doubt Saudi-Russia agreement
Oil prices have fallen despite the head of Russia’s sovereign wealth fund saying Russia and Saudi Arabia are “very, very close” to a deal on supply cuts.
Brent crude was down 2.5 per cent at $33.30 in a sign that investors are sceptical an agreement will be reached. US West Texas Intermediate was two per cent lower at $27.80.
Oil prices collapsed in March after Saudi Arabia launched a price war and ramped up production. Its move was a result of a breakdown in talks with Russia over supply cuts at Opec+, the oil cartel.
Price falls have been worsened by a steep fall in demand due to the global recession caused by coronavirus. Brent crude is now trading at roughly half the $60 mark it was at in January.
But Kirill Dmitriev, chief executive of the Russian Direct Investment Fund, today told CNBC that Russia and Saudi Arabia were close to reaching a deal that could see oil prices rise again.
A meeting of Opec+ was originally scheduled for today, but has been pushed back to a virtual conference on Thursday as major oil-producing countries try to thrash out an agreement.
High uncertainty about oil prices
US President Donald Trump lifted investors’ hopes on Thursday when he said Saudi Arabia and Russia were likely to cut production by more than 10m barrels per day. Prices surged.
Today, Dmitriev said: “I think the whole market understands that this deal is important and it will bring lots of stability, so much important stability to the market, and we are very close.”
Dmitriev added that Russian President Vladimir Putin “talked about how important this oil deal is, so Russia is committed”.
He also said that the US was in talks to cut its production of oil. “I think it’s Russia, Saudi Arabia, US, other countries that need to step in to stabilise the markets and to bring stability,” he said.
But when Trump talked about oil at the weekend he made no mention of any US plans to cut supply.
Joshua Mahony, market analyst at IG, said: “What is clear is that any production deal would fall short of the huge slump in demand expected in the months ahead.”
Goldman Sachs has predicted that 26m barrels per day will be struck off global demand amid the coronavirus recession.