President Donald Trump is scheduled to meet with US energy officials on Friday to discuss ways to help the country’s troubled shale oil and gas producers, including the possibility of imposing punitive trade measures on imports of Saudi crude.
The Wall Street Journal (WSJ), citing two unidentified sources, said that potential aid Washington could extend to the US shale zone includes tariffs on oil imported from Saudi Arabia and a departure from the law which requires that American ships be used to transport goods – including oil – between ports.
Oil prices fell nearly 70% from January highs due to blockages due to pandemic hammer demand for coronavirus, and a price war unleashed by Saudi Arabia flooded already saturated crude markets .
The battle for market share between the Saudis and the Russians started after Riyadh failed to convince Moscow to support deep cuts in production.
As the two countries suffer a financial blow as crude oil prices fall, Saudi Arabia can produce crude oil at a lower cost than any other competitor. This leaves American producers of shale oil at higher cost, particularly those who have incurred large debts to finance the drilling of new wells, which are particularly vulnerable.
On Wednesday, the American shale oil company Whiting Petroleum Corp became the first publicly traded victim of the sharp drop in crude oil prices when it filed for Chapter 11 bankruptcy.
Supply, demand and diplomacy
Trump called the price war between Saudi Arabia and Russia “crazy” and complained that cheaper crude oil “than water” is hurting the US energy industry.
While Russia has responded to White House diplomatic openings to help stabilize global oil markets, Saudi Arabia has ignored Trump’s calls and continues to pump crude with reluctance.
Russian President Vladimir Putin speaking at a government meeting via a video link as a precautionary measure against the coronavirus on Wednesday called on oil producers and consumers to find a solution to improve the situation ” difficult “.
He also warned that if investment in the oil sector fell, oil prices would certainly rise, which he said “nobody needs”.
“This is why we, in collaboration with the main producers and consumers, should develop such decisions, which could alleviate the situation on the market as a whole,” said Mr Putin, according to the results of the meeting.
Energy Secretary Dan Brouillette spoke with his Russian counterpart Alexander Novak on Tuesday about the falling prices on Tuesday and agreed to hold future discussions with other large oil producers and consumers worldwide.
The call came a day after Trump and Putin agreed on a telephone conversation for their senior energy officials to discuss the global oil market turmoil.
Washington-Moscow talks mark a new front in oil diplomacy since the alliance between the Organization of the Petroleum Exporting Countries (OPEC) and the major oil producers led by Russia – a group known as OPEC + – collapsed by acrimony.
Trump said on Tuesday that he would join Saudi Arabia and Russia, if necessary, for talks on falling oil prices.
Crude oil benchmarks closed a volatile quarter on Tuesday with their biggest losses in history.
World benchmark Brent crude oil was below $ 25 a barrel on Wednesday, while US benchmark crude West Texas Intermediate fell below $ 20 a barrel before rising above it.
The United States has become the world’s largest producer of oil and gas in recent years, thanks to a technology-driven shale drilling boom. But the current price of oil is lower than the cost of production of many American drillers, threatening the leveraged American shale industry.
The Trump administration is trying to persuade Saudi Arabia, the world’s largest oil exporter, to cut production and has announced that it will soon send a special energy envoy, Victoria Coates, to the kingdom.
The Kremlin said Wednesday that Russia and Saudi Arabia are not holding talks on the oil market at the moment, and that President Putin has no plans to immediately call Saudi leaders.
But the Kremlin added that such talks could be set up quickly if necessary.