With oil prices below Russia’s budget breakeven and with over 20 percent of global oil demand wiped out by the coronavirus pandemic, Russian oil firms could be ready to participate in a global production cut deal with Saudi Arabia, the United States, and other major producers, sources familiar with the matter told Bloomberg.
Russian oil firms, who did not increase production this month as promised weeks ago when the OPEC+ deal collapsed, have signaled a readiness for global coordinated action to stop the price crash, as the demand destruction during the lockdowns from India to the U.S. turned out much more than initially thought, according to Bloomberg’s sources.
Four sources at Russian oil firms told Bloomberg that they could be ready to agree to some kind of a three-way deal among Russia, Saudi Arabia, and the United States.
Two weeks ago, Russia was dismissing all calls for and reports about returning to the negotiating table, confident that it would outlast Saudi Arabia in the oil price war.
However, the global oil demand outlook has become more and more pessimistic by the day, with some analysts expecting the demand loss in April at 30 million bpd – nearly a third of the world’s typical consumption of oil.
Russia’s President Vladimir Putin is slated to hold a video call with oil executives from the local firms later on Friday to discuss the “unfavorable” situation in the oil market, Putin’s press secretary Dmitry Peskov said today.
On Thursday, Peskov told reporters that no one had launched any talks about a potential new oil-production deal to replace the OPEC+ format, but noted that “no one is happy” with the current oil price.
The current prices of Brent Crude are well below Saudi Arabia’s fiscal break-even price of $80 a barrel oil, below the break-evens of nearly all U.S. shale production, and below the Russian breakeven price, too.
Shortly after Kremlin’s spokesman said no talks were being held, U.S. President Donald Trump said that he hoped and expected that Saudi Arabia and Russia would “cut back approximately 10 Million Barrels, and maybe substantially more,” while OPEC’s top producer and de facto leader Saudi Arabia called for an emergency meeting of OPEC+ and “another group of countries” to try to find “a fair solution” to the current market imbalance. The video meeting will be held on Monday, and the U.S. oil regulator will also be invited to take part in the discussions.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
Environment Canada issues heat warning for Montreal and Laval regions – CTV News Montreal
Environment Canada has issued a heat warning for Montreal and the region with warm, humid air settling over the area.
“The combined values of temperature and humidity will give humidex values that will reach 40,” Environment Canada says.
The heat is expected hit the Montreal, Laval, Longueuil and Chateauguay areas and taper off in the evening as precipitation arrives.
During a heat wave, residents are reminded to drink plenty of water and stay in a cool area.
No break from the heat in sight as Environment Canada issues alerts – SooToday
Temperatures in the 30s are expected for the Sault and area Thursday and into the weekend, says Environment Canada. The humidex is going to make it feel more like 36 degrees Celsius and overnight lows will range from 16 to 20.
The full text of a release from Environment Canada follows:
Heat Warning in effect for:
- Sault Ste. Marie – St. Joseph Island
- Agawa – Lake Superior Park
- Searchmont – Montreal River Harbour – Batchawana Bay
A heat event is expected Thursday into the weekend.
Inland from the Great Lakes, daytime high temperatures near 30 with humidex values near 36 are expected over the next few days. Overnight lows will range from 16 to 20 degrees Celsius.
Areas near the Great Lakes will feel slightly cooler temperatures.
Please refer to your public forecast for further details on expected temperatures.
Hot and humid air can also bring deteriorating air quality and can result in the Air Quality Health Index to approach the high risk category.
Extreme heat affects everyone.
The risks are greater for young children, pregnant women, older adults, people with chronic illnesses and people working or exercising outdoors.
Never leave people or pets inside a parked vehicle.
Outdoor workers should take regularly scheduled breaks in a cool place.
Please continue to monitor alerts and forecasts issued by Environment Canada. To report severe weather, send an email to ONstorm@canada.ca or tweet reports using #ONStorm.
Fed Looks to Bolster Forward Guidance; Mulls Yield Curve Control , Minutes Show – Investing.com
By Yasin Ebrahim
Investing.com – Federal Reserve policymakers discussed the need to bolster forward guidance in the coming months when they met last month, and suggested that the jury was still out on the use of yield curve control, according to the Fed’s June meeting minutes released Wednesday.
“Various participants noted that the economy is likely to need support from highly accommodative monetary policy for some time and that it will be important in coming months for the Committee to provide greater clarity regarding the likely path of the federal funds rate and asset purchases,” according to the minutes.
There was also support to tie forward guidance to economic metrics, with a number of policymakers suggesting future monetary policy be linked to inflation outcomes.
“Participants generally indicated support for outcome-based forward guidance. A number of participants spoke favorably of forward guidance tied to inflation outcomes that could possibly entail a modest temporary overshooting of the committee’s longer-run inflation goal but where inflation fluctuations would be centered on 2 percent over time,” the minutes showed.
Fed members discussed two tools for conducting monetary policy when the federal funds rate is at its effective lower bound, including forward guidance and large-scale asset purchase programs in supporting employment and inflation and an approach that caps or targets interest rates along the yield curve — a measure allowing central banks to target specific government bond yields through the purchase and sale of bonds, to help keep lending rates near zero.
Debate Over Yield Curve Control
Pointing to a review of the yield caps or targets (YCT) policies the Federal Reserve followed during and after World War II and that the Bank of Japan and the Reserve Bank of Australia are currently employing, nearly all Federal Open Market Committee members indicated that they had many questions regarding the costs and benefits of such an approach.
“The three experiences suggested that credible yield curve target (YCT) policies can control government bond yields… and may not require large central bank purchases of government debt,” the minutes showed. “But the staff also highlighted the potential for YCT policies to require the central bank to purchase very sizable amounts of government debt under certain circumstances … and the possibility that, under YCT policies, monetary policy goals might come in conflict with public debt management goals, which could pose risks to the independence of the central bank.”
With the central bank is likely to persist with ensuring rates remain lower for longer, yield curve control is unlikely to make into the Fed’s toolbox in the immediate future. “Yield curve control is still under discussion, though FOMC members still have “many questions” on the costs and benefits. It’s probably not imminent,” Pantheon Macroeconomics said.
Following their June 9-10 meeting, Fed officials left interest rates in the range of 0%-to-0.25% and signaled that near zero rates would continue through at least 2022.
In their post-meeting statement, they vowed to persist with bond purchases “at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions.”
The Fed committed to buying $80 billion a month in Treasuries and $40 billion a month in agency mortgage backed securities.
The Fed’s balance sheet has declined by $12.4 billion to $7.08 trillion as of June. 24, compared with the week prior, driven by a decline in demand for the Fed’s dollar swap lines from overseas central banks.
The U.S. central bank’s balance sheet stood at about $4 trillion just before the pandemic struck in the U.S. in early March.
Threat of a Second Wave
Since the Fed’s last meeting, the U.S. has seen a greater resurgence in infections that has forced states to roll back plans to speed up the pace of reopening businesses.
In testimony before the House Financial Services Committee on Tuesday, Federal Reserve Chairman Jerome Powell, acknowledged the threat of a potential second wave of infections on the economy.
A second wave could “force government and force people to withdraw again from economic activity … and “undermine public confidence, which is what we need to get back to lots of economic activity,” Powell said.
“Output and employment remain far below their pre-pandemic levels. The path forward for the economy is extraordinarily uncertain and will depend in large part on our success in containing the virus,” he added.
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