Trump hopes for bigger oil cuts stemming from historic deal

President Trump on Monday suggested the historic deal he helped broker between major oil producing nations will lead to further production cuts worldwide.

Oil producing countries finalized an agreement Sunday evening to reduce global oil production by just under 10 million barrels a day for May and June, a nearly 10 percent drop in production.

The deal between members of the Organization of the Petroleum Exporting Countries and other major producers like Russia, known as OPEC+, puts an end to a trade dispute that began when Saudi Arabia and Russia flooded the market with excess oil at a time when demand was plummeting due to the coronavirus pandemic.

“Having been involved in the negotiations, to put it mildly, the number that OPEC+ is looking to cut is 20 Million Barrels a day, not the 10 Million that is generally being reported. If anything near this happens, and the World gets back to business from the Covid 19,” Trump tweeted Monday morning.

The White House declined to provide additional context for Trump’s tweet.

Experts say the 9.7 million barrel a day cut won’t be enough to offset the 30 percent decline in prices, though market forces are likely to drive production even lower.

While the finalized deal leaves little hope of an official 20 million barrel a day reduction like the one Trump referenced in his tweet, other nations outside the oil-producing cartel have said their production totals will drop, meaning global output could decline beyond what was outlined in Sunday’s deal.

“The historic agreement that we saw over the weekend, from OPEC and OPEC+ is roughly 10 million barrels. But that is, in fact, only half of the story,” Energy Secretary Dan Brouillette told Fox Business on Monday morning.

“There are over 100 countries that produce oil all around the world, and what we’ll see is production declining over the next few months as the world deals with this COVID-19 pandemic. So, when you add up all of the production cuts around the world, we’re going to much closer to 20 million barrels per day coming off the market.”

An analysis by IHS Markit found that global production could decline by as much as 14 million barrels a day as the U.S., Canada and other countries cut production in response to prices that fell from $53 a barrel in February to a low of $22 a barrel in March.

Within the U.S., oil production is expected to decline by half a million barrels of oil a day, according to the U.S. Energy Information Administration, a figure that could grow to 700,000 next year.

But even the 10 million barrel per day drop is a massive one — twice the size of the deal cut in the 2008-2009 financial crisis.

Trump even promised to reduce U.S. production — despite lacking any legal authority to do so — in an attempt to help clinch the deal.

The OPEC+ deal was initially stalled by Mexico over the weekend. Repeated calls between Trump and Mexican President Andrés Manuel López Obrador, as well as Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin, helped finalize the agreement.

“The United States will help Mexico along, and they’ll reimburse us sometime at a later date when they’re prepared to do so,” Trump told reporters Friday of the U.S. offering to reduce production by some 250,000 to 300,000 barrels a day in order to help reach the 400,000 barrel a day reduction being asked of Mexico.

The bulk of the cuts are being absorbed by Saudi Arabia and Russia, who will each cut production by 2.5 million barrels per day.

“What could not have been imagined is that Donald Trump, who has been a critic of OPEC for years, is the one who put it together. Of all the deals he’s done in his life, this has to be the biggest and most complex,” IHS Markit Vice Chairman Daniel Yergin said in a statement on the close of the deal.