After posting an all-time high one-day gain Thursday, crude oil prices added even more in early trading Friday. West Texas Intermediate (WTI) traded up about 8% and Brent traded up about 12%, as unnamed sources continue to suggest that a detente in the oil-price war is about to materialize. On Thursday, Brent crude rose by 21% and WTI added 25%, respectively.

Although both the Saudis and the Russians claimed to be able to weather a steep drop in crude prices when the price war began in early March, neither appears to have counted on the other being willing or able to hold out. Unless something changes soon, both could lose market share as well as have to deal with low prices for their countries’ chief export. The long-term damage could be exacerbated if U.S. production cannot be curbed.

U.S. oil company executives are scheduled to meet with the U.S. president today, but an official told Reuters on Thursday that Trump did not plan to ask U.S. producers to participate in the proposed global cut of 10 million barrels a day.

A Friday morning report attributed to OPEC country officials said that an “alliance led by Saudi Arabia and Russia” would meet Monday to “debate” a production cut of at least 6 million barrels a day. Earlier estimates have indicated a cut of 10 million barrels a day would be needed to bring the market back into balance.

To reach that number, producers in the United States, Canada and Brazil would have to agree to cut nearly 3 million barrels a day while Russia and OPEC members excluding Saudi Arabia would agree to cut 1.5 million barrels each. Saudi Arabia would cut production by at least 3 million barrels a day.

Getting the United States on board is critical for OPEC and Russia. The price war began as an effort to drive out high-cost producers like U.S. companies with extensive operations in shale plays. If U.S. producers voluntarily comply with the suggested cut to production, the world’s other two major producers will have achieved their goal.

In all likelihood, a cut in U.S. production was inevitable if WTI crude prices stayed below $20 a barrel for very long. While many producing shale wells can make a (small) profit at that price, drilling, completing and beginning to pump from a new shale well would be unprofitable below $30 a barrel for all shale drillers.

U.S. oil producers were not included in the $2.2 trillion relief package approved last week and that could push a lot of small producers out of business or, more likely, into the arms of larger firms. Either way, thousands of U.S. jobs would be at risk because the wells are likely to be shut-in to help curb oversupply. The oil would remain in the ground and an expected rebound, once the coronavirus pandemic is over, would make producing that oil profitable once again.

While smaller, more endangered U.S. producers are likely to seek financial help from the president, larger producers probably won’t support them. The American Petroleum Institute (API), which represents America’s largest oil companies, does not support a government-mandated production cut. API Senior Vice President Frank Macchiarola said in a statement:

The challenges we face today are unprecedented, but they are not an excuse to walk away from the free market principles that have guided this industry for more than a century. Make no mistake, production quotas would be a shortsighted, knee-jerk reaction with disastrous consequences for the future of U.S. energy leadership.”

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