Oil prices jumped on Thursday on reports that Saudi Arabia and Russia have reached a deal on production cuts at an emergency meeting between the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+.

For more than a month now, Russia and Saudi Arabia have been engaged in a price war, which has destabilized the global oil market. After Thursday’s emergency virtual teleconference between OPEC+ members, G-20 energy ministers will meet on Friday.

President Donald Trump has frequently celebrated and called for low oil prices. However, in recent weeks, he has begun to acknowledge the problems facing the U.S. oil industry.

Before the coronavirus took hold, demand for oil was down. Now, as millions forego travel and work from home, the global supply glut has grown.

“The U.S. oil sector is now bringing in more than $500 million per day less in revenue than it was in January,” said David Livingston, a senior analyst with Eurasia Group. Among the states hit hardest, he notes, are Texas, North Dakota, New Mexico, and Louisiana.

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“Normally, you would get a benefit from low oil prices,” Livingston said. Due to the pandemic, there is very little upside. Consumers aren’t making purchases based on the cost of oil. “We are basically getting much of the pain, and very little of the upside.”

U.S. energy companies are struggling to stay afloat as falling prices make them less competitive — and they are laying off workers.

Today’s energy economy is forcing U.S. companies to make tough decisions. They are struggling to stay afloat as falling prices make them less competitive, and they are laying off workers.

“We may look back and say that the latter part of 2019, the beginning of 2020, was truly the high-water mark for employment in the U.S. shale industry in the 21st century,” Livingston said.

This week, the federal government released its latest Short-Term Energy Outlook. In a statement, Shaylyn Hynes, a spokeswoman for the U.S. Department of Energy, blamed growth — or the lack thereof — on “the unexpected and unprecedented worldwide demand impacts of COVID-19, coupled with the disruptive actions of the ongoing dispute between OPEC+ nations.”

Many analysts and investors are optimistic there will be some kind of an agreement, but Stephen Schork, founder of The Schork Report energy newsletter, isn’t one of them. He projected the U.S. could see WTI priced in single digits.

“The U.S. oil sector is now bringing in more than $500 million per day less in revenue than it was in January.”

“I’m not expecting much coming out of [OPEC’s] meeting,” Schork told NBC News. Even if there were a deal, he added, it could leave the global oil market with “a surplus of 10 or 15 million barrels a day through the second quarter.”

A huge concern for producers is how little storage space there is worldwide. Tanks, ships, and pipelines are filling up, which complicates the calculus for many U.S. producers who want to hold on to their oil until the outbreak subsides and there is greater demand. According to Schork, the timing makes this even more challenging.

“Even if we get the COVID-19 shelter-in-place protocols lifted by April 30, and we start to see some pop in demand, you are going to have so much oil sitting in tanks that, regardless of production cuts, you are still looking at a massive glut of oil going into the third quarter,” he said.

The third quarter is, historically, when demand is highest, since it includes the summer driving months. Demand tends to drop in the fourth quarter.

Many analysts expect a deal to cut production would have to involve the United States. According to his spokeswoman, Secretary of Energy Dan Brouillette will participate in the G-20 meeting, “to discuss with his counterparts around the world the urgent need to restore calm to global energy markets.”

This year, Saudi Arabia chairs the G-20, and that gives Livingston optimism there will be an agreement after all. “I think that makes this a little too big to fail,” he said.

The U.S. oil industry is not monolithic, and that makes these kinds of negotiations challenging. Between independent producers and multinational energy companies, concerns vary. That dynamic was on full display last week, when Trump invited executives to the White House for a meeting.

“When you think about how the U.S. government has to navigate this, there is no one single homogenous U.S. oil industry that they are responding to, or seeking to support,” says Livingston. “It’s a pretty heterogenous group of interests.”

If Russia and Saudi Arabia do reach an agreement, with or without the United States, it won’t go into effect immediately. According to Livingston, it would take weeks to implement fully. Stopping production involves a lot more than turning a switch from on to off.

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