United States President Donald Trump is reportedly planning to 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 punitive trade measures on imports of Saudi Arabian crude.
The Wall Street Journal (WSJ), citing two unidentified sources, said potential aid that Washington could extend to the US shale patch includes tariffs on oil imported from Saudi Arabia and waiver of the law that requires US vessels to be used to transport goods – including oil – between ports.
Oil prices have plummetted nearly 70 percent from January highs as lockdowns due to the coronavirus pandemic hammer demand, and a price war initiated by Saudi Arabia floods already saturated crude markets.
The battle for market share between the Saudis and Russians ignited after Riyadh failed to convince Moscow to support deep output cuts.
While both countries are taking a financial hit as crude prices nosedive, Saudi Arabia can produce crude more cheaply than any other competitor. That leaves higher-cost US shale oil producers, especially those that took on a lot of debt to fund the drilling of new wells, especially vulnerable.
On Wednesday, US shale oil company Whiting Petroleum Corp became the first publicly traded casualty of crashing crude prices when it filed for Chapter 11 bankruptcy.
Supply, demand and diplomacy
Trump has called the price war between Saudi Arabia and Russia “crazy” and complained that crude that is cheaper “than water” is hurting the US energy industry.
While Russia has responded to diplomatic overtures from the White House to help stabilize global oil markets, Saudi Arabia has ignored Trump’s pleas and continues to pump crude with abandon.
On Wednesday, Russian President Vladimir Putin, speaking at a government meeting set up via a video link as a precaution against the coronavirus, called on both oil producers and consumers to find a solution to improve the “challenging” situation.
He also warned that if investments into the oil sector fall, oil prices are sure to spike, something he said “no one needs”.
“That’s why we, together with the main producers and consumers, should work out such decisions, which would mitigate the situation on the market on the whole,” Putin said, according to the readout of the meeting.
On Tuesday, US Secretary of Energy Dan Brouillette spoke with his Russian counterpart Alexander Novak about the price slump, and they agreed to hold future discussions involving other major world oil producers and consumers.
The call occurred a day after Trump and Putin agreed in a phone conversation to have their top energy officials discuss global oil market turmoil.
The discussions between Washington and Moscow mark a new front in oil diplomacy since the alliance between the Organization of the Petroleum Exporting Countries (OPEC) and major oil producers led by Russia – a grouping known as OPEC+ – collapsed in acrimony.
Trump said on Tuesday that he would join Saudi Arabia and Russia, if need be, for talks about the fall in oil prices.
Crude oil benchmarks ended a volatile quarter on Tuesday with their biggest losses in history.
On Wednesday, global benchmark Brent crude settled below $25 a barrel, while US benchmark West Texas Intermediate crude dipped below $20 a barrel before crawling back above it.
The US has grown into the world’s largest oil and gas producer in recent years, thanks to a technology-driven shale-drilling boom. But the current price of oil is below the production cost of many US drillers, threatening the highly leveraged US shale industry.
The Trump administration is trying to persuade Saudi Arabia, the world’s top oil exporter, to cut output and says it will soon send a special energy envoy, Victoria Coates, to the kingdom.
The Kremlin said on Wednesday that Russia and Saudi Arabia were not holding talks regarding the oil market at the moment, and that President Putin has no immediate plans to have a phone call with Saudi leadership.
But the Kremlin added that such talks could be set up quickly if necessary.