Push for more cuts sends oil close to $40 a barrel
The world's biggest oil producers are close to extending output cuts as part of a battle to shore up prices following a collapse in demand.
Russia and Saudi Arabia are inching closer to a deal which will keep production low as much of the world slowly emerges from lockdown.
Talks between the two sides sent the Brent crude benchmark rallying to almost $40 a barrel, its highest since early March. Oil prices rise if less of the fossil fuel is being sold on the market because buyers are forced to outbid each other.
A conference call between Moscow and nations in the Saudi-led Opec cartel which was originally planned for June 9 has been brought forward to this Thursday in a bid to secure agreement.
Riyadh is said to be pushing for bigger production cuts to support oil prices, but other nations are keen to increase output to bring in more revenue.
Under the current deal, agreed in April, a reduction of 9.7m barrels a day - about a tenth of global production - will fall to 8m from July 1.
Friction has emerged between Russia and Saudi Arabia, the two countries responsible for triggering a price war in March that along with the pandemic sent oil prices crashing. They were later the driving force behind the cuts as part of a bid to repair relations.
The Saudis are keen to maintain the current level of cuts until the end of the year, while Russia is said to be pushing for gradual output hikes.
The pair are discussing a compromise that would see cuts maintained until September 1.
A concerted effort from 23 of the world’s largest oil producing nations has restored some stability to oil markets in recent weeks, lifting Brent crude more than 2pc to $39.22 with US oil also higher at $36.21. West Texas Intermediate prices briefly turned negative at the height of the crisis in a historic plunge as US storage space ran out.
Prices are still nearly 50pc down since the start of the year.
US President Donald Trump spoke on Monday with his Russian counterpart Vladimir Putin about production cuts, the Kremlin said.
Moscow and Riyadh both decided to flood the market in March after talks broke down, at the same time as the coronavirus crisis sparked an unprecedented collapse in demand.
The fallout - exacerbated by the decimation of economic activity due to the pandemic - led to the largest crash in oil prices since the 1991 Gulf War.
In the end, Mr Trump was forced to intervene as the price war laid waste to the US shale sector nad pushed many of its producers to the brink of bankruptcy.
The president threatened Saudi Arabia’s young Crown Prince Mohammed bin Salman with a withdrawal of all US military support if he did not call a truce with Mr Putin, while Russia was forced back to the negotiating table as Covid wrecked the country’s economy.
