OPEC+ meeting nears with resolve for deep oil cuts, but still much talking to do

London — OPEC and its allies are moving closer toward a historic deal to take at least 10% of global crude supply off the market as they get set for the first of two critical meetings later Thursday, with key producers Saudi Arabia and Russia signalling their willingness to commit to significant production cuts.

OPEC kingpin Saudi Arabia could bring its production down to about 8 million b/d, from its current level of about 12 million b/d, according to a source briefed by the kingdom.

Meanwhile, Russia's energy ministry has said that Russia, the largest non-OPEC producer cooperating with OPEC, was prepared to cut 1.6 million b/d if others followed suit and cut proportionally. Russian crude and condensate production was 11.29 million b/d in March, according to government figures, though the previous supply accords of the so-called OPEC+ alliance only covered crude.

The positions indicate the OPEC+ coalition's math is starting to line up for a total production cut of 10 million b/d or more, though delegates said many details — including exact quotas, length of the deal, and participation by countries outside the group — remain in flux and could drag out talks at the meeting.

"What we are looking for is more participation from other countries, not only OPEC+ but outside, including the US, Norway and some other influential countries," Kuwaiti oil minister Khaled al-Fadhel told S&P Global Platts in an interview Wednesday.

The OPEC+ meeting via webinar is scheduled to start at 1400 GMT. From outside the 23-country alliance, Norway, Ecuador, Colombia, Argentina, Egypt, Indonesia and Trinidad and Tobago are expected to participate.

On Friday, energy ministers of the G20, including the US and Canada, will also meet online for a summit that could endorse and widen the production cut accord, as they seek to offset the coronavirus pandemic's impact on the oil market. The G20, which represents the world's largest economies, is chaired by Saudi Arabia this year.

Besides Saudi Arabia, the rest of OPEC could contribute about 3 million b/d in cuts, according to sources familiar with the talks, asking not to be named due to the sensitivity of the negotiations.

However, the OPEC total could be smaller, as Russia is insisting that the baseline from which new quotas are to be determined be set at Q1 production levels, not current production.

Several OPEC countries, particularly Saudi Arabia, the UAE and Kuwait, surged their output in March, with plans to hit record highs in April.

Russia's 1.6 million b/d cut offer could be combined with another 1 million b/d in reductions from Mexico, Kazakhstan, Oman, Azerbaijan, Malaysia and four other non-OPEC producers that have been cooperating with OPEC on a series of output cuts since 2017, according to sources.

The US and Canada are likely to say at the G20 summit that their production is already in decline due to market forces and could be included in the deal, though Russia has pressed for actual voluntary cuts.

The US Energy Information Administration on Tuesday forecast that US oil output will fall close to 2 million b/d in a year due to market forces.

If the declines from the US and Canada are counted, then the total cut agreement would exceed the OPEC+ alliance's 10 million b/d goal, and any other contributions from other producers would boost the deal.

"Our position is clear. Russia stands for joint coordinated actions in the interest of stabilizing the global energy market," Kremlin spokesman Dmitry Peskov said Thursday, according to TASS news agency. "All other nuances will be discussed during the teleconference."