As President Trump prepared to meet on Friday with seven U.S. oil and gas executives at the White House, he announced today that Saudi Arabia and Russia had agreed to enormous cutbacks in their countries' crude production. 

Trump told CNBC and tweeted that Saudi Crown Prince Mohammed Bin Salman and Russian President Vladimir Putin had committed to slashing production by 10 million to 15 million barrels per day. The countries are the world's No. 2 and No. 3 oil producers behind the U.S.

The president offered little evidence to support the claim. And although the Saudi state news agency subsequently reported that the kingdom had begun seeking a meeting of OPEC members and Russia, Kremlin officials quickly denied the existence of any deal or potential deal. 

"There was no conversation" between bin Salman and Putin, the Russian president's spokesman said according to the Financial Times. "So far, no one has started talking about any specific or even abstract deals."

Nonetheless, the remarks sparked a spike in oil prices, with the global benchmark Brent crude jumping 20 percent from the start of trading as of Thursday afternoon, and West Texas Intermediate – the bellwether for U.S. shale oil – surging by about 9 percent. 

The sprawling scale of the cuts effectively reflects a giant 15 percent drop in global daily demand. The drop-off is the result of harsh travel restrictions and stay-at-home orders instituted by governments worldwide to try to slow the spread of the novel coronavirus that causes the disease COVID-19. The decline in demand has been further exacerbated by the resulting financial downturn.

The announcement came just one day before Trump was scheduled to meet with the CEOs of Exxon Mobil, Chevron, Occidental Petroleum, and Continental Resources, as well as other oil and gas executives. It renewed speculation that the White House may pressure leading U.S. oil producers to implement production cuts to further shore up anemic prices – and as a face-saving measure that would help solidify the deal between Saudi Arabia and Russia.

Experts disagree whether the U.S. would join a deal to cut production. For one, unlike the authoritarian regimes in Riyadh and the Kremlin, Washington has comparatively fewer mechanisms at its disposal to force such a cut. Plus the U.S. oil and gas sector is fiercely independent and has traditionally heavily opposed federal regulatory efforts. 

"It's very unlikely that the U.S. will be materially involved in an international oil deal that would cut or regulate oil production on a national scale," said Ellen Wald, president of Transversal Consultant and senior fellow at the Global Energy Center at the Atlantic Council, a think tank. "This would likely have to go through Congress and then would be challenged in the courts. If a Saudi-Russia oil deal is predicated on U.S. involvement then the chances of such a deal are extremely slim."

However, the Trump administration has floated the possibility of instituting tariffs on imported oil  – which is furiously opposed by the sector's main trade groups, arguing that the recent downturn in oil prices is due to anemic demand rather than an oversupply of oil. The threat of tariffs could be used to cajole U.S. oil companies into agreeing to "voluntary" cuts. Meanwhile the powerful Texas Railroad Commission, which regulates oil in the Lonestar State, is convening a hearing April 14 to consider whether it could institute a statewide production cut, a move that comes at the request of one of the biggest oil and gas operations there.

"The U.S. is going to be part of it in some form," said Steven Kopits, managing director of Princeton Energy Advisors. "At this point, to keep pumping oil under these circumstances is truly insane. So we're truly talking about a face-saving way to get a deal done – it's not really about what's the right thing to do is. It's about making sure that the Saudis and the Russians save face in making a deal."

He added: "If you're expecting the Saudis and the Russians to carry them all on their backs, that's a huge sacrifice for them. The U.S. will make some gesture of participating in these cuts. How much they can participate, I don't know."

Saudi Arabia triggered the initial crash in oil prices last month, when it decided to launch a price war with Russia after the Kremlin refused to renew an agreement with Saudi-led OPEC to cut production to shore up prices. The crown prince abruptly slashed prices and ramped-up production, sending prices cratering by as much as 50 percent. 

Although the action may have been most directly aimed at Russia, it inflicted particular pain on the U.S. shale oil sector, which uses hydraulic fracturing – or fracking – and horizontal drilling techniques that are more expensive than conventional drilling. Prices of WTI have been hovering in the low $20s, far below the $46 to $52 per barrel that U.S. producers need to turn a profit, according to a survey published amid the crisis by the Federal Reserve Bank of Dallas.

"Two or three weeks ago we didn't know how bad it would get. Now we have a much clearer idea of what the actual numbers are: It's bad," Kopits said. "I don't know if we get to a cut of 10-15 million. But even if we get to 7 million, we'll still be in a heck of a lot better shape than we are now."

Analysts quickly predicted last month that the Saudi government, though it initiated the price war, would be unable to withstand the financial pain that the move also inflicted on itself. The kingdom is heavily dependent on oil revenues to fund its government. Experts say that the moment may be arriving. 

"Saudi Arabia may be more motivated now than it was back in March to slow down from the 12 million bpd it started pumping in April because demand for Saudi oil seems to be lacking," Wald said. "An oil deal would be a good way for Saudi Arabia to save face, though it seems Russia isn't jumping in just yet."