Trump ally highlights U.S. oil cuts as White House calls for restrictions between Russia and Saudi Arabia

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Shale energy official with close ties to President Donald Trump said U.S. producers are already taking on part of the burden of cutting crude oil as the White House encourages Saudi Arabia and Russia to resolve a global oil glut by reducing theirs.

Harold Hamm, executive president of Continental Resources, said in an interview Monday that the president called him two or three times a week to discuss the state of the oil industry, which was hit by a price of crude less than $ 30 per barrel.

Riyadh and Moscow precipitated the collapse after abandoning a three-year-old production deal and unleashing a bitter price war on world oil markets. A meeting to work out a new deal was postponed from Monday to later this week amid Saudi-Russian recriminations.

The two countries said others must join any further production cuts. Saudi Arabia, which holds the rotating presidency of the G20, also urges members of this group to join supply restrictions. So far, US production has not been hindered.

Hamm said Continental and other US companies are now forced to make deep cuts as storage tanks fill up in response to a historic drop in demand due to the coronavirus pandemic. “Everyone here is cutting production,” he said.

13m

Maximum number of barrels of oil produced per day by American shale groups

With West Texas Intermediate oil settling at $ 26.08 a barrel on Monday, he said oil refiners were buying less crude. A refinery owned by CVR Energy has sent a notice to Continental to immediately cut 25% of its production in Oklahoma, added Hamm.

Various measures to limit the supply of oil to the United States have been launched in recent weeks. An official with the Texas Railroad Commission, which oversees the state’s oil and gas production, has suggested that it may take steps to control oil volumes. In Oklahoma, in Continental’s home state, a group of local oil producers asked the Oklahoma Corporation’s Commission to limit supply.

When Saudi Arabia, Russia, and Allied exporters limited supplies in 2016, it pushed up oil prices and prompted U.S. producers to invest to increase production to 13 million barrels per day, the highest in world.

Asked whether shale producers would be free riders if countries other than the United States agreed to cut production, Mr. Hamm replied, “No. I can answer this question very decisively, no. “

Hamm was among nine oil industry leaders invited to the White House last Friday to discuss the situation. He said he understood that Saudi Arabia and Russia had “pledged to the president” to cut production by 10 million bpd.

Cuts of this magnitude are unlikely. Saudi Arabia has increased oil production by more than 20% in the past month and says it now produces more than 12 million barrels a day. The Russian output is more than 11 m b / d.

Continental said last month that its own production would drop 5% year-on-year as it halved its initial investment budget of $ 2.65 billion for 2020.

The company’s share price has dropped 50% since the start of March, and bond prices are signaling an increase in default risks, with a $ 1.1 billion bond maturing in 2022 trading at 66 cents a dollar.

Hamm has called for investigations into the illegal dumping and manipulation of the market by foreign oil suppliers. If Saudi Arabia and Russia do not live up to their supposed commitments to cut production, new US tariffs on foreign oil would be “absolutely” necessary, he said.

Mr. Hamm chairs the Domestic Energy Producers Alliance, a group of state-owned oil companies and industry associations. Continental is not a member of the American Petroleum Institute, Washington’s largest oil lobby, or the American Exploration & Production Council, a trading group of independent shale producers.

API CEO Mike Sommers attended the White House meeting last week and said the president had not removed oil prices from the table, but the idea of ​​coordinated reductions in US production n was not a topic of conversation.

“A number of my members and others at the meeting thought about how if you do something that you think will help the business upstream, you could do big damage to other parties of the value chain, like the downstream part of the business. , especially refiners, “said Sommers.

Additional reporting by Joe Rennison and Derek Brower in London

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