Saudi Arabia on Thursday called for an emergency meeting between the Organization of the Petroleum Exporting Countries (OPEC) and its allies, following mounting pressure from United States President Donald Trump to declare a truce in an oil price war that has sent crude prices plummeting and threatened higher-cost US shale oil producers.
Trump took to Twitter on Thursday to say that he had spoken to Saudi Arabia’s de facto leader, Crown Prince Mohammed bin Salman (MBS), and was hopeful that Riyadh and Moscow were working towards an agreement to cut production.
“Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!” Trump tweeted.
“…..Could be as high as 15 Million Barrels. Good (GREAT) news for everyone!” Trump also tweeted.
Prices of global benchmark Brent crude vaulted more than 40 percent on the news to $36.29 a barrel, before settling back below $30 a barrel. US benchmark West Texas Intermediate (WTI) crude prices jumped more than 30 percent to $27.39 a barrel before settling back below $25.
While the markets reacted positively, some energy analysts remain sceptical that a deal is truly in the cards.
“Taking 10 or 15 million barrels off the market could be way beyond the kind of deal OPEC is capable of making,” Gregory Gause, head of the International Affairs Department at the Bush School of Government and Public Service at Texas A&M University, told Al Jazeera.
Gause added that the scale of cuts put forward by Trump would make it difficult to ensure compliance by all players. “It requires getting a lot of other people on board. Everybody taking drastic cuts sets up a circumstance where lots of people have incentive to cheat on whatever quotas they accepted in the deal.”
Oil prices have plummeted some 70 percent since the start of the year as coronavirus containment measures gut crude demand. That shock was exacerbated after the market alliance between Saudi Arabia and Russia collapsed in acrimony last month, when Riyadh failed to convince Moscow to back deep oil output cuts.
The resulting Saudi-initiated price war has seen the kingdom ramp up production, flooding markets already awash in crude.
While both Saudi Arabia and Russia have taken a hit financially during the price war, some higher-cost US shale producers face collapse.
Trump will meet with US energy executives on Friday to discuss ways to help out the country’s struggling shale oil and gas producers, including the possibility of imposing tariffs on imports of Saudi crude, the Wall Street Journal first reported on Wednesday.
“I don’t think tariffs on Saudi oil will do a lot of good. People who are suggesting this are just grabbing at straws,” Samantha Gross, an energy security fellow at the Brookings Institution, told Al Jazeera.
“We have this idea that we can get the Saudis to cooperate, but they have no incentive to do that,” she added. “US shale producers are their competitors. There’s no way the Saudis want to cooperate to save the US market.”