Recent negotiations involving leaders from major oil-producing nations and the United States will prove irrelevant for oil prices, which are low because of depressed demand, the chief executive of Brazil’s Petrobras said on Thursday evening.
During an online event hosted by Brazilian brokerage XP, Petrobras CEO Roberto Castello Branco said the dispute between non-OPEC member Russia and the group’s de facto leader, Saudi Arabia, showed that the Organization of the Petroleum Exporting Countries had no medium- or long-term pricing power.
“I sincerely think that this dispute between Russia and Saudi Arabia – although the markets reacted positively to some news about President Trump getting involved and what not – has become irrelevant amid the dimension of the (coronavirus) crisis,” Castello Branco said.
“Oil prices are low because global demand has gone down.”
Castello Branco’s comments may temper speculation that Brazil will enter a potential deal among oil-producing nations to stabilize the oil market. Still, Brazilian Energy Ministry officials have remained silent on any potential negotiations.
Petrobras and government officials say the company is run without any political interference, although the government is by far the biggest shareholder in Petroleo Brasileiro SA (PETR4.SA), as the firm is known. Government and company officials are known to communicate frequently.
Crude prices </LCOo1> crashed in early March as talks between Russia and Saudi Arabia fell apart. Demand has since taken a severe hit as the economies of many countries have ground to a halt amid efforts to battle the global coronavirus outbreak.
Brent oil prices and U.S. benchmark WTI both rose over 20% on Thursday after U.S. President Donald Trump said he brokered a deal between Russia and Saudi Arabia to cut supply. But the details of any potential accord remained unclear. Officials in other oil-producing nations, including Mexico, signaled an openness to multilateral talks to stabilize oil prices.
Castello Branco also discussed a recent move by Petrobras to cut production by 200,000 barrels per day, or about 6% of output. If the company did not curb output, it would have had to charter ships to store the oil because of a lack of demand, he said.