President Donald Trump said he might join a discussion about oil production and prices with Saudi Arabia and Russia that, according to him, is ongoing.
“The two countries are discussing it and I am joining at the appropriate time if need be,” Trump told reporters as quoted by Reuters. He also said he had talked separately with Russia’s President Vladimir Putin and Saudi Arabia’s Crown Prince Mohammed and that these talks had been “great”.
Oil has plummeted to $25 for Brent and $20 for West Texas Intermediate, but some U.S. grades are trading a lot lower than this: Louisiana Light, for instance, fell to as little as $5.85 a barrel over the last week of March, and Wyoming crude traded as low as $1.25 a barrel.
But even WTI at $20 is quite problematic for most producers in the United States, so it is no surprise there have been calls for production cuts. One member of the Texas Railroad Commission, Ryan Sitton, said he had discussed the matter with OPEC’s chairman, Mohammed Barkindo.
Earlier this week, executives from two large shale oil producers, Parsley Energy and Pioneer Natural Resources, wrote to the commission to request the imposition of obligatory production cuts. These cuts would be an unprecedented move that highlights the devastating effects of the oil price war that coincided with the Covid-19 outbreak, which has wiped out about a fifth of global demand, according to estimates from experts.
Meanwhile, however, Saudi Arabia said it was going to flood Europe with deeply discounted Arab Light, a move seen as an attack on Russia in one of its key markets, which doesn’t bode well for any negotiations. Demand in Europe is floundering because of the coronavirus outbreak, and refiners are cutting their orders of Saudi crude by 25 percent, Reuters reported, citing unnamed sources.
The Russians are not blinking. Moscow has promised up to a 500,000 bpd production increase and has assured the market that the country has enough resources to cover budget shortfalls at $25-30 oil for six to ten years.
By Irina Slav for Oilprice.com
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