The United States is urging Saudi Arabia to halt its plans to increase crude oil output to a record level as part of the kingdom’s price war with Russia, which pushes oil prices to their lowest level in nearly two decades. The Trump administration wants Saudi Arabia’s help to bring back oil prices to the prior-price war level by dialing back plans to boost crude production to 12.3 million bpd in April.
Secretary of State Michael Pompeo delivered this message to Saudi Crown Prince Mohammed bin Salman just before a conference call between G20 leaders discussing the economic fallout of the COVID-19 pandemic. Following Pompeo’s message, Brent crude little changed at around $27/barrel on Wednesday.
Oil prices crashed after Saudia Arabia and Russia failed to reach an agreement to deepen oil production cut to support oil prices amid the coronavirus pandemic which weakened demand severely. As a result, Saudi Arabia and other OPEC members decided to abandon the supply curbs pact, with the kingdom vowing to boost production, initiating an oil price war.
As the world’s largest crude producer, the US is partially sheltered from the price crash. However, it has threatened hundreds of thousands of Americans working in the industry. American oil producers have cut capital spending by tens of billions of dollars, with 70% of US shale drillers facing bankruptcy.
On the other hand, Saudi Arabia has so far intended to keep its plans, a source in a Bloomberg report said. During the time of President Reagan and Bush, the US tried to convince Saudi Arabia to abandon a price war, but it did not work both times, and it would unlikely work this time, according to an analyst with Brookings Institution.
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Published on March 26, 2020 12:09 PM (GMT+8)Last Updated on March 26, 2020 12:09 PM (GMT+8)
