Category: Business

Canada, U.S. farms face crop losses due to foreign worker delays

WINNIPEG, Manitoba/CHICAGO (Reuters) – Mandatory coronavirus quarantines of seasonal foreign workers in Canada could hurt that country’s fruit and vegetable output this year, and travel problems related to the pandemic could also leave U.S. farmers with fewer workers than usual.

Foreign labor is critical to farm production in both countries, where domestic workers shun the hard physical labor and low pay.

In Canada, where farms rely on 60,000 temporary foreign workers, their arrivals are delayed by initial border restrictions and grounded flights. Once they arrive, the federal government requires them to be isolated for 14 days with pay, unable to work.

In the United States, nearly 250,000 foreign guest workers, mostly from Mexico, help harvest fruit and vegetables each year. The State Department is processing H-2A visas for farm workers with reduced staffing, though some companies are still having a hard time getting workers in on time.

Ontario farmer Mike Chromczak said he was afraid he might be unable to harvest his asparagus crop next month unless his 28 Jamaican workers start arriving by mid-April.

“It would be well over 50% of our farm’s revenue” lost, Chromczak said. “But I see it as a much bigger issue than me. This is a matter of food security for our country.”

Steve Bamford’s 35 Caribbean workers are just starting to trickle in to his Ontario apple orchards. Then they are isolated and paid for 40 hours per week during that period without touching a tree. Pruning work, a critical step to maximize yields, is now overdue.

“It’s an extreme cost. You don’t plan on bringing people in and not work for two weeks,” Bamford said.

Some Canadian farmers expect to reap smaller fruit and vegetable harvests this year if foreign labor is not available soon, said Scott Ross, director of farm policy at the Canadian Federation of Agriculture.

In the United States, “delays are potentially very hazardous to farmers who were counting on that workforce to show up at an exact period of time to harvest a perishable crop,” said Dave Puglia, CEO of Western Growers Association, which represents fruit and vegetable companies in states like California and Arizona.

He said workers in the United States do not have to wait 14 days before they start working, although more efforts are being made to space workers out on the farms.

Dannia Sanchez, president of D & J and Sons Harvesting in Florida, is awaiting approval to bring in some 200 temporary agriculture workers, while blueberries in Florida ripen and Michigan asparagus nears harvest.

Abad Hernandez Cruz, a Mexican farmworker harvesting onions in Georgia, said he is working 12 or more hours a day.

“A lot of people are missing,” he said, referring to farmworkers whose visas weren’t approved after the United States scaled back some consular activities in response to coronavirus.

“If the farm doesn’t produce, the city doesn’t eat.”

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Oil skids on oversupply fears, U.S. stock futures jump

SYDNEY (Reuters) – Oil prices skidded on Monday after Saudi-Russian output discussions showed no immediate signs of progress while U.S. stock futures jumped as investors were encouraged by a slowdown in coronavirus-related deaths and new cases.

Sterling GBP= fell after British Prime Minister was admitted to hospital following persistent coronavirus symptoms as the pandemic rapidly spreads.

Brent crude LCOc1 fell as much as $3 in early Asian trading after Saudi Arabia and Russia postponed a meeting over a potential pact to cut production to Thursday.

Analysts said the news could lead to some sell-off in currency markets too.

Also weighing on the pound were fears other senior government officials who were in the same briefing as Prime Minister Boris Johnson could be affected by the virus, said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto, Canada.

The pound fell 0.4% in early trade on Monday in a knee-jerk reaction and was last down 0.3% at $1.2222.

The U.S. dollar was up a touch against the yen at 108.58.

Equity investors were looking at the positives though.

U.S. stock futures ESc1 jumped more than 1.5% in early Asian trading on Monday after U.S. President Donald Trump expressed hope the country was seeing a “levelling off” of the coronavirus crisis.

The gains came despite New York Governor Andrew Cuomo cautioning that it was not yet clear whether the crisis in the state had reached a plateau.

Australian YAPcm1 and Nikkei NKc1 futures also pointed to gains.

Investors took solace from the fact that COVID-19 cases also appeared to be reaching a peak in Europe with Italy seeing the number of patients in intensive care falling for the second consecutive day.

“Focus in markets will now turn to the path out of lockdown and to what extent containment measures can be lifted without risking a second wave of infections,” National Australia Bank analyst Tapas Strickland wrote in a note.

“Key to a strong rebound in China will be the ongoing lifting of containment measures with Wuhan – the epicentre of the outbreak – set to lift containment measures on April 8.”

Strickland, however, noted many in China were still subject to social distancing and isolation restrictions to prevent a resurgence in infections.

The pandemic has claimed more than 64,000 deaths as it further exploded in the United States and the death toll climbed in Spain and Italy, according to a Reuters tally.

Concerns about heavy damage to the global economy have pushed investors into the perceived safety of government bonds.

Brent crude futures LCOc1 slipped 6.2%, or $2.13, to $31.98 a barrel while U.S. crude CLc1 dived 7.4%, or $2.12, to $26.12.

Spot gold XAU= was down 0.2% at $1,612.9 an ounce.

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Exclusive: Silver Lake to seek more than $16 billion for buyout fund – sources

(Reuters) – Private equity firm Silver Lake Partners is preparing to seek at least $16 billion from investors for its sixth flagship buyout fund, braving the economic uncertainty of the coronavirus outbreak, according to people familiar with the matter.

Investing the money raised in the coming months could allow Silver Lake to snap up companies at depressed valuations, given the pandemic’s impact on the global economy, including the technology and media sectors that the private equity firm focuses on, the sources said.

Buyout funds typically return money to investors three to seven years following their fundraising, long after this pandemic is expected to have subsided. Nevertheless, concerns among institutional investors, such as public pension funds and insurance firms, about their liquidity amid the market turmoil will make Silver Lake’s fundraising a key test of buyout firms’ ability to fundraise during the crisis.

Silver Lake is preparing to start raising the new fund, Silver Lake Partners VI, in the second quarter, amassing between $16 billion to $18 billion, said the sources, who cautioned that the plans are still subject to change.

The sources declined to be identified because the preparations are confidential. Silver Lake declined to comment.

Last year, Blackstone Group Inc (BX.N), the world’s largest private equity firm, raised a $26 billion flagship buyout fund while Vista Equity Partners Management LLC raised $16 billion from investors for its seventh technology buyout fund. CVC Capital Partners Ltd is also raising up to 20 billion euros ($21.63 billion) for its latest buyout fund, which is expected to be the largest ever fund raised in Europe.

More than half a trillion dollars flowed into technology-focused buyout funds, including Silver Lake, between 2008 and 2018, according to data provider Preqin, helping to support dealmaking among companies in software, social media, and cybersecurity.

Silver Lake has $43 billion in assets under management, and its portfolio of companies includes social media firm Twitter Inc (TWTR.N), computer hardware maker Dell Technologies Inc (DELL.N), and movie theater chain AMC Entertainment Holdings Inc (AMC.N), according to its website.

Silver Lake raised $15 billion from investors in 2017 for its fifth buyout fund. That fund had an initial target of $12.5 billion, and as of the end of December 2018 had delivered an internal rate of return (IRR) of 11%, according to the website of Minnesota State Board of Investment, one of Silver Lake’s investors.

The prior $10.3 billion fund, Silver Lake Partners IV, had delivered an IRR of 24.4% as of the end of December, according to the Minnesota State Board of Investment. By comparison, the Minnesota State Board of Investment’s entire private equity portfolio delivered an IRR of 12.5%.

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Trump threatens tariffs on oil imports to 'protect' U.S. energy workers

WASHINGTON (Reuters) – U.S. President Donald Trump said on Saturday he would impose tariffs on crude imports if he has to “protect” U.S. energy workers from the oil price crash that has been exacerbated by a war between Russia and Saudi Arabia over market share.

“If I have to do tariffs on oil coming from outside or if I have to do something to protect our … tens of thousands of energy workers and our great companies that produce all these jobs, I’ll do whatever I have to do,” Trump told reporters in a briefing about the coronavirus outbreak.

Oil prices have dropped by about two-thirds this year as the pandemic crushes demand and as major producers Russia and Saudi Arabia boost output in a war over market share.

The United States in recent years has become the world’s biggest oil producer, at times putting its exports in competition with Russia and members of the Organization of the Petroleum Exporting Countries, or OPEC.

As oil prices drop, many heavily leveraged U.S. energy companies face bankruptcies and workers are at risk of layoffs. After meeting with industry executives on Friday, Trump said he was not considering tariffs at the moment, but it was a tool that could be used “if we’re not treated fairly.”

Two major industry groups, the American Petroleum Institute and American Fuel & Petrochemical Manufacturers, told Trump in a letter on Wednesday that tariffs on oil imports would jeopardize the domestic refining business as some plants depend on crude from abroad.

The United States imported more 1 million barrels per day of oil from Russia and Saudi Arabia combined in 2019, according to the U.S. Energy Information Administration.

Trump reiterated on Saturday that Saudi Arabia had told him it had agreed with Russia to jointly reduce output by an unprecedented 10 million barrels per day or more. The countries have not confirmed the plan, other than saying they would discuss ways to stabilize global oil markets.

OPEC and Russia have postponed a Monday meeting to discuss oil output cuts until April 9, OPEC sources said, due to a Saudi-Russia dispute over who is to blame for plunging crude prices.

When oil prices started dropping last month, Trump initially emphasized it would be good for motorists. On Saturday he said gasoline prices could fall to 90 cents a gallon and conceded that the oil price crash is “going to hurt a lot of jobs in our country.”

De facto OPEC leader Saudi Arabia and Russia would be “destroying themselves” if they do not end the price war by reducing output, Trump said, noting that “I couldn’t care less about OPEC.”

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How the coronavirus job cuts played out by sector and demographics

(Reuters) – The job losses suffered in March as the U.S. economy shut down in the face of the novel coronavirus pandemic were widespread but still were disproportionately felt in a handful of employment sectors and by women, the young and the less educated.

In all, 701,000 jobs were reported lost last month, the Labor Department said on Friday, but even that massive number – the largest since the financial crisis 11 years ago – did not capture the true depth of the losses because the monthly survey was conducted too early in March.

Still, it shows that even in the earliest stages of the business closures that have since spread across the country, the cuts were most heavily felt in industries such as hotels, restaurants and education as the travel industry shut down, bars and eateries closed their doors, and day care centers shuttered, all in the aim of limiting the spread of the disease.

And, perhaps ironically in the middle of a health crisis, the health care sector was among the most afflicted as providers of nearly any service apart from acute care for sufferers of COVID-19, the lung ailment caused by the novel coronavirus, suspended operations and stopped seeing patients.

The following charts offer a picture of how March’s job losses – certain to be revised higher and followed by even larger cuts in April – played out across various industries and demographic groups.

Graphic: Which sectors lost jobs in March? – reut.rs/2wP4ynv

The leisure and hospitality sector shed 459,000 jobs – 65% of all the positions lost in March. The loss, the largest monthly decline in the sector ever, effectively wiped out two years of employment gains in the industry.

The largest share of that came at restaurants and bars, which slashed 417,000 jobs.

Around 76,000 health and education jobs were eliminated led by 29,000 cuts at dentists and physicians offices and another 19,000 at day care centers.

The federal government sector stood out as a rare example of net job gains last month, thanks to the addition of 17,000 temporary workers for the 2020 census.

Graphic: Unemployment across age and race – reut.rs/346fk4K

The unemployment rate shot up to 4.4% from a half-century low of 3.5%, the largest one-month increase in the jobless rate since 1975.

By race or ethnicity, the largest increases were seen among Asians and Latinos, with increases of 1.6 percentage points each, nearly twice the overall increase of 0.9 percentage point. Both whites and African Americans saw their rates rise at the same pace as the national rate, although the unemployment rate now for blacks – at 6.7% – is 65% higher than for whites at 4%.

The youngest workers were also the most likely to lose work in the early stages of the shutdown.

The unemployment rate for teenagers rose by 3.3 percentage points to 14.3% and for those between 20 and 24 years old by 2.3 points – the most since 1953 – to 8.7%.

By contrast, unemployment for those in the 25-to-34-year-old age bracket rose by just 0.4 percentage point to 4.1%. The jobless rate for workers aged 45 to 54 rose 0.7 percentage point to 3.2%, the lowest rate for any age group.

Graphic: Unemployment across gender and education – reut.rs/3aGQlr7

Workers with lower levels of education also found themselves thrown out of work at a higher rate in March.

The rate for workers without a high school diploma jumped by 1.1 percentage points to 6.8%, the highest in nearly three years.

For people with a college degree, meanwhile, the jobless rate rose by 0.6 percentage point to 2.5%. Still, it was the largest monthly increase in the rate for that demographic since the Labor Department began tracking it in the early 1990s.

And finally, there was a notable gender gap in the unemployment rate increase last month. The jobless rate for men rose by 0.7 percentage point, while the rate for women rose 0.9 percentage point, perhaps explained by their greater representation in the hardest-hit employment sectors such as hospitality and health care.

The overall rate for both sexes over the age of 20 now stands at 4%.

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3M to make more face masks, ramp up imports to U.S. after Trump order

(Reuters) – 3M Co (MMM.N) said on Friday it would increase the production of respirators and import more masks into the United States, after President Donald Trump invoked a law to help ease a shortage of essential items needed to fight the coronavirus pandemic.

The company said it will work closely with the Federal Emergency Management Agency to prioritize orders for the masks.(bit.ly/3dLDUfT)

Trump slammed 3M in a tweet late on Thursday after earlier announcing he was invoking the Defense Production Act to get the company to produce face masks.

The Defense Production Act, which was passed in 1950, grants the president the power to expand industrial production of key materials or products for national security and other reasons.

U.S. trade adviser Peter Navarro said that the government had some issues making sure that enough of the masks produced by 3M around the world were coming back to the United States.

“The narrative that we aren’t doing everything we can as a company is just not true,” 3M Chief Executive Officer Mike Roman told CNBC television in an interview on Friday.

3M said on Friday it has secured China’s approval to export to the U.S. 10 million N-95 respirators manufactured by the company in China.

The company’s shares declined about 2% to $134 in morning trade, compared with a near 1% fall on the broader S&P 500 index .SPX.

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Exclusive: Air France-KLM in talks on multibillion euro state-backed loan package

PARIS/AMSTERDAM (Reuters) – Air France-KLM (AIRF.PA) is in talks with banks to receive billions of euros in loans guaranteed by the French and Dutch governments, as the airline group braces for a sustained coronavirus shutdown, sources told Reuters.

The two states, which each own 14% of Air France-KLM, have paused a long-running boardroom feud to address the cash crunch, according to three people close to the discussions.

Details and amounts are not finalised and could change, the people said. Under the most likely scenario, Air France may get as much as 4 billion euros in French-guaranteed loans while KLM receives close to 2 billion backed by The Hague, one source said.

The group has appointed BNP (BNPP.PA) and Societe Generale (SOGN.PA) to advise on refinancing, two of the sources said.

Both banks declined to comment.

“We are naturally in constant discussions with both governments,” an Air France-KLM spokeswoman said, declining further comment.

The French and Dutch governments also declined to comment in detail on the Air France-KLM talks. Both countries have expressed willingness to offer financial help.

“We’ve been in discussions for a long period of time with KLM and Air France and very specifically with the French state,” Dutch Finance Minister Wopke Hoekstra told Reuters on Wednesday. “It’s extremely important to help this vital company through these difficult times.”

Governments around the world are scrambling to prop up major airlines that are at risk of bankruptcy as the pandemic gathers pace, gutting travel demand and bringing traffic to an indefinite standstill.

The U.S. Senate approved a $58 billion bailout for the American aviation industry on March 25. In Europe, Norwegian Air (NWC.OL) and SAS (SAS.ST) have received pledges of state support, while Lufthansa (LHAG.DE) is poised to receive billions in aid.

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Coronavirus punishes Warren Buffett's equity holdings

NEW YORK (Reuters) – The coronavirus pandemic may have erased around $64 billion of value from Warren Buffett’s equity portfolio at Berkshire Hathaway Inc (BRKa.N), setting up the conglomerate for one of the largest quarterly losses ever by an American company.

“The headline number will be ugly,” said James Shanahan, an Edward Jones & Co analyst with a “buy” rating on Berkshire, referring to net results.

Berkshire’s portfolio of U.S.-listed stocks, including Kraft Heinz Co (KHC.O), may have shrunk by 26% in the first quarter if Berkshire did no buying and selling, according to Refinitiv data and regulatory filings.

By contrast, the Standard & Poor’s 500 .SPX fell just 20%, and Berkshire’s own stock fell about the same.

Buffett urges investors to think long-term, focusing on Berkshire’s operating results and the intrinsic value of its stock holdings, some of which it has owned for decades.

In his Feb. 22 shareholder letter, Buffett said he expects the stocks to deliver “major gains,” albeit irregularly.

Still, the declines reflect challenges the pandemic poses even for Buffett, the world’s fourth-richest person according to Forbes magazine and among its most esteemed investors.

They also followed Buffett’s prediction in a Feb. 24 interview on CNBC, five days after the S&P 500 set an all-time high, that Berkshire would outperform in down markets, and over the long term perform “in a very, very safe manner.”

The 89-year-old Buffett had prostate cancer in 2012, and last month began working at his Omaha, Nebraska, home rather than Berkshire’s office two miles away. He did not immediately respond to a request for comment sent to his assistant.

Berkshire owns more than 90 businesses such as the BNSF railroad, Geico car insurance, its namesake energy company and smaller businesses such as See’s candies and Borsheims jewelry. AIRLINES STAGGER Since 2018, an accounting rule has required Berkshire to report paper gains and losses from its stocks with earnings, resulting in huge gyrations.

For example, annual net income swelled to $81.42 billion in 2019 from $4.02 billion in 2018, a down year for stocks, while operating profit fell 3% to $23.97 billion.

After taxes are factored in, Berkshire’s first-quarter net loss could rival quarterly losses of $44.9 billion posted by AOL Time Warner in 2002, or $42.5 billion by General Motors in 2007. Berkshire’s loss could grow further if it wrote down its 26.6% Kraft Heinz stake, which some analysts call overdue. But it would likely fall short of American International Group Inc’s (AIG.N) $61.7 billion loss in the fourth quarter of 2008. Much of the weakness likely came in financials, where the value of Berkshire’s disclosed stakes in Bank of America Corp (BAC.N), Wells Fargo & Co (WFC.N) and American Express Co (AXP.N) fell about $27 billion in the quarter. Berkshire’s stake in Apple Inc (AAPL.O), its largest holding, may have fallen nearly $9 billion. Another $5 billion may have disappeared from stakes in the four biggest U.S. carriers: American Airlines Group Inc (AAL.O), Delta Air Lines Inc (DAL.N), Southwest Airlines Co (LUV.N) and United Airlines Holdings Inc (UAL.O). And Occidental Petroleum Co (OXY.N) sank 72%, stung by plunging oil prices and leverage after it bought Anadarko Petroleum Corp, which Berkshire helped fund with $10 billion of preferred stock throwing off $800 million of annual dividends. FOOD NOURISHES

Quarterly results are expected around May 2 when Berkshire holds its annual meeting, though the pandemic forced Buffett to cancel the surrounding “Woodstock for Capitalists,” a weekend of events that normally draw more than 40,000 people to Omaha.

At least four Berkshire-owned stocks rose last quarter. Perhaps unsurprisingly, all are associated with consumer staples or healthcare, sectors that many investors expect to outperform in down markets.

They included retailer Amazon.com Inc (AMZN.O), biotechnology company Biogen Inc (BIIB.O), kidney dialysis provider DaVita Inc (DVA.N) and grocer Kroger Co (KR.N).

Another grocer in Berkshire’s portfolio, Costco Wholesale Corp (COST.O), fell just 3%. It remains unclear how the pandemic might let Buffett whittle Berkshire’s $128 billion cash pile. Buffett prefers buying whole companies to stocks, but has not made an “elephant” sized acquisition since 2016. He could also offer lifelines to companies, as he did during the 2008-2009 financial crisis for General Electric Co (GE.N), Goldman Sachs Group Inc (GS.N) and even Harley-Davidson Inc (HOG.N). Shanahan said Buffett could find many new places to invest.

“I would be super-disappointed if he didn’t put tens of billions of dollars of his capital to work in the first half of this year,” he said.

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Oil jump lifts Wall Street as jobless claims data surges

(Reuters) – U.S. stocks rallied on Thursday as hopes for a truce in the price war between Saudi Arabia and Russia and a cut in oil output drove gains, taking some sting out of a shocking jump in Americans filing jobless claims due to coronavirus-led lockdowns.

The S&P energy index .SPNY, down by more than 50% this year due to the Russia-Saudi price war and coronavirus-driven demand worries that has caused oil prices to plunge, climbed 9.08%.

Saudi Arabia has called for an emergency meeting of oil producers, while U.S. President Donald Trump said he expected the kingdom and Russia to cut output by as much as 10 million to 15 million barrels a day. That helped U.S. crude CLc1 futures settle up 24.7%, and Brent up 21.5%, their biggest daily percentage gains on record.

Still, major averages waded into negative territory multiple times before a late rally pushed stocks higher to close near session highs.

“It got beaten up so badly, you don’t rally like this unless it was many people thinking this got overdone,” said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago.

The Dow Jones Industrial Average .DJI rose 469.93 points, or 2.24%, to 21,413.44, the S&P 500 .SPX gained 56.4 points, or 2.28%, to 2,526.9 and the Nasdaq Composite .IXIC added 126.73 points, or 1.72%, to 7,487.31.

The list of top gainers on the benchmark S&P 500 was littered with oil companies. Occidental Petroleum (OXY.N) surged 18.90%, with names such as Apache Corp (APA.N) and Halliburton (HAL.N) also seeing double-digit percentage gains.

A bump in prices may still not be enough to save some of the debt-laden U.S. shale companies that are on the brink of bankruptcy as demand continues to plunge due to the coronavirus pandemic.

Analysts foresee a further decline in U.S. stocks as country-wide shutdowns to limit the spread of the virus result in a virtual halt in business activity and force companies to lay off employees and save cash.

Boeing Co (BA.N), once a symbol of America’s industrial might, has offered buyout and early retirement packages to employees, sending its shares down 5.68%.

Investors continue to absorb a wave of bad economic news that will continue to paint a grim picture. Initial claims for unemployment benefits last week rose to 6.65 million, exceeding the top end of economists’ estimates at 5.25 million.

“Overall this is a little bit of a victory in and of the fact that it was such a bad number and the market did kind of shake it off. It is also the market preparing for a lot more bad numbers,” said Kinahan.

As earnings season slowly begins to get underway, Walgreens (WBA.O) fell 6.30% after the drugstore retailer reported a steep decline in U.S same-store sales in the last week of March. [L4N2BQ32Z]

Advancing issues outnumbered declining ones on the NYSE by a 1.61-to-1 ratio; on Nasdaq, a 1.34-to-1 ratio favored advancers.

The S&P 500 posted no new 52-week highs and 20 new lows; the Nasdaq Composite recorded 6 new highs and 132 new lows.

Volume on U.S. exchanges was 12.64 billion shares, compared with the 15.87 billion average for the full session over the last 20 trading days.

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Trump touts 'great' Saudi-Russia oil deal to halt price rout, but details unclear

DUBAI/MOSCOW/WASHINGTON (Reuters) – U.S President Donald Trump said on Thursday he had brokered a deal with top crude producers Russia and Saudi Arabia to cut output and arrest an oil price rout amid the global coronavirus pandemic, though details of how cuts would work were unclear.

Trump said the two nations could cut output by 10 to 15 million barrels per day (bpd) – an unprecedented amount representing 10% to 15% of global supply, and one that would require the participation of nations outside of OPEC and its allies.

A senior U.S. administration official familiar with the matter said Trump would not formally ask U.S. oil companies to contribute to the production cuts, a move forbidden by U.S. antitrust legislation.

Russia and Saudi Arabia have been at odds since early March, when they failed to agree on a deal curbing output as the coronavirus spread around the globe. The pandemic has worsened since, freezing economic activity and sending oil prices into a tailspin as producers confronted the prospect of a dramatic fall in demand along with a flood of unwanted oil supply.

Saudi Arabia, the de facto head of OPEC, called on Thursday for an emergency meeting of OPEC and non-OPEC oil producers, an informal grouping known as OPEC+, state media reported, saying it aimed to reach a fair agreement to stabilize oil markets. Trump is separately set to meet with U.S. oil industry executives on Friday.

Trump said he spoke with both Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman on Thursday. “I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!” Trump wrote on Twitter.

“Trump’s call to Putin has changed everything,” one OPEC+ source said, adding that initial talk among the group was about how other large producers such as Canada and Brazil would need to join in any coordinated output cuts.

Jason Kenney, the premier of Alberta, Canada’s primary oil-producing province, said Thursday that Alberta was open to joining a production-cut deal, though he said, “It’s the Saudis and the Russians here who are the problem.” Canada produces roughly 4 million barrels of oil every day.

Global oil demand is expected to fall by about 30 million bpd in April, or about one-third of daily consumption. Some 3 billion people around the world have been put on lockdown to slow the spread of coronavirus, which has sickened 1 million people worldwide and killed nearly 50,000.

The immense decline in demand sent oil prices to their lowest levels since 2002, close to $20 per barrel, hitting budgets of oil-producing nations and dealing a huge blow to the U.S. shale oil industry, which cannot compete at low prices.

The downward pressure has been exacerbated by the battle for market share between Russia and Saudi Arabia. Russia rejected the Saudi proposal to take supply off the market in part because it has cut its own output for years while U.S. production grew to a record 13 million bpd, gobbling up market share.

Related Coverage

  • Russia does not rule out returning to oil talks with Saudi Arabia

Russian Energy Minister Alexander Novak said on Thursday that Moscow was no longer planning to raise output and was ready to cooperate with the Organization of the Petroleum Exporting Countries and other producers to stabilize the market.

It was not clear when Saudi Arabia’s proposed emergency OPEC meeting could be held.

A meeting could represent a thaw in Saudi-Russia tensions. A senior Gulf source familiar with Saudi thinking told Reuters that Russia’s opposition to its proposal to deepen output cuts was the cause of market turmoil.

At the time of the deal’s collapse, OPEC and its allies were collectively cutting output by about 1.7 million bpd – making a 10-to-15 million-bpd cut a big hurdle unless it brought in other major worldwide producers.

The swift and aggressive Saudi response to the collapse of the OPEC+ deal shocked the oil industry. The kingdom slashed export prices, opened the taps to pump at maximum production and tried to sell cheaper oil to refiners that buy Russian crude.

OUTPUT CUTS

Major global oil producers including Chevron Corp (CVX.N), Brazil’s Petrobras and Britain’s BP Plc (BP.L) have already scaled back production estimates as fuel demand has dropped precipitously and storage is rapidly filling. Storage is expected to be full by May, analysts said, which would force oil producers to cut output anyway.

“I don’t think this does anything in the near term. Our pipelines have told us they don’t have room for our barrels,” said Bob Watson, chief executive of U.S. shale producer Abraxas Petroleum, based in San Antonio, Texas.

The free-fall in prices has spurred regulators in the U.S. state of Texas, the heart of the country’s oil production, to consider regulating output for the first time in nearly 50 years, while producers in neighboring Oklahoma asked state regulators also to consider cuts Thursday.

Ryan Sitton, one of three elected oil-and-gas regulators in Texas, tweeted on Thursday that he had spoken with Russia’s Novak about a cut of 10 million bpd in global supply.

“While we normally compete, we agreed that #COVID19 requires unprecedented level of int’l cooperation,” Sitton wrote.

Brent oil prices rose 21% to $29.94 per barrel, having earlier risen to as high as $36.29. U.S. benchmark WTI crude settled up 25% to $25.32 a barrel.

Even with Thursday’s surge, Brent is still less than half its $66 closing level at the end of 2019.

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