Brent crude LCOc1 futures fell 3.27%, or 98 cents, to $28.96 per barrel as of 0335 GMT, after having soared 21% on Thursday.
U.S. West Texas Intermediate (WTI) crude CLc1 futures fell 4.46%, or $1.13, to $24.19 a barrel, after having surged 24.7% on Thursday.
Friday’s drop reflected market scepticism over whether a deal to call off the Saudi-Russian price war would go ahead if the U.S. does not scales back output, and whether such a cut would be sufficient to balance the market in face of a deep economic recession caused by the coronavirus pandemic and draconian containment measures.
Trump said the two countries could cut output by 10 to 15 million barrels per day (bpd) – an unprecedented amount representing 10% to 15% of global supply. Trump said he had made no offer to cut U.S. output.
Saudi Arabia called on Thursday for an emergency meeting of OPEC and non-OPEC oil producers, saying it aimed to reach a fair agreement to stabilize oil markets.
Analysts said both Riyadh and Moscow will be looking for the participation of other countries, in particular the United States.
“It is difficult to see the current OPEC+ group cutting output by at least 10 million bpd – the scale of the reduction would be just too much for the group to handle,” ING said in a research note.
Saudi could drop production down to around 8.5 million bpd but would likely be reluctant to go below that level because of the desire to maintain associated gas production, while Russia will likely look for some measure of sanctions relief from Washington, said Helima Croft, global head of commodity strategy at RBC Capital Markets.
Washington will not ask U.S. domestic oil companies for a coordinated cut in production and is still awaiting the details of planned cuts in Saudi Arabia and Russia, a senior administration official said.
With the coronavirus pandemic worsening, Citi analysts forecasted the decline in oil demand in the second quarter could be 18-20% for the world, or 18-20 million bpd, which in turn should see refinery runs collapse by over 2 million barrels per day, triggering an unprecedented growth in inventory of some 1 billion barrels over two months.
The proposed cut would at least ease some pressure on a global shortage of oil storage, analysts said.