Oil producers set for 'unprecedented' deal to help stricken industry

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Production of oil may be cut to help prices recover amid the coronavirus pandemic.

Some of the world's largest oil producers could be set to make a deal that would see production curbed in a bid to guard against the devastating effects of coronavirus on their industry.

In what is being recognised as an unprecedented situation, lawmakers and diplomats from Saudi Arabia, Russia and the US are reportedly to spend the coming days discussing whether they would be willing to cut the amount of oil coming from their countries - and if so, by how much.

Russia and Saudi Arabia are said to be poised to slash production significantly, but insiders say they will only be willing to do so if the US follows suit.

Furthermore, the Institute of World Economy and International Relations in Moscow suggested Russia may call upon the US to lift some sanctions as an additional measure.

Although US energy secretary Dan Brouillette told Bloomberg he had a "productive discussion" with his counterpart in Saudi Arabia Prince Abdulaziz bin Salman, it's thought the Trump administration may only offer up a gradual output reduction.

Meanwhile, US president Donald Trump told a press briefing yesterday (April 6th 2020) that OPEC had not yet required him to ask American oil producers to reduce their output.

"I think it's happening automatically, but nobody's asked me that question yet so we'll see what happens," he added.

A meeting of the organisation known as OPEC+ is now scheduled for Thursday, which could then be followed by a gathering of G20 energy ministers to further hash out a potential production deal.

The oil industry is increasingly struggling with the economic effects of the coronavirus pandemic, with global demand falling by as much as a third and prices reduced by up to 50 per cent as companies struggle to sell their wares to closed-down former buyers.

Although oil prices recovered slightly upon the news of a potential production deal, figures suggest it won't be enough to cut the current supply glut as existing storage space runs out.

According to the International Energy Agency, March saw a collapse in global oil demand of 1.1 million barrels per day (bpd) compared to 2019. As a result, it has slashed its annual growth forecast to just 825,000 bpd, the lowest figure since 2011.