WASHINGTON (AP) — President Donald Trump said Thursday that he expects Saudi Arabia and Russia will end an oil war and dramatically cut production.
The price for U.S. benchmark crude surged 24%.
A global glut in production, coupled with an economy reeling from the coronavirus pandemic, has sent energy prices to lows not seen since 2002. Trump tweeted Thursday that he had spoken with Saudi Crown Prince Mohammad Bin Salman, just days after talking to Russian President Vladimir Putin about the matter.
Trump tweeted; “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!”
Saudi Arabia called for an urgent meeting of OPEC and non-OPEC producers, just weeks after triggering the price war with Russia that sent oil prices plummeting.
Russia’s refusal to extend and deepen production cuts with OPEC and its de facto leader Saudi Arabia sparked immediate backlash from Riyadh, where oil policy is largely dictated by Crown Prince Mohammed bin Salman. The kingdom slashed oil prices last month and vowed to ramp up production to more than 12 million barrels a day.
The clash is taking place during a period of vastly reduced energy demand. The pandemic arrived with the global economy entering a cycle of slower growth. The confluence has pushed Brent crude oil prices to below $30 a barrel, far below what Saudi Arabia or Russia need to balance their budgets. The price of U.S. crude fell harder than at any point in history, plunging more than 65%, to around $20 per barrel, lower than what many U.S. shale companies can withstand.
In a statement carried on the state-run Saudi Press Agency Thursday, the kingdom said its call for a meeting of major oil producers indicates the country’s support for the global economy at this time, and is “in appreciation of” Trump and the request made by the United States. It said the purpose of calling a meeting is aimed at reaching a fair agreement to restore balance to the oil market.
The state-run news agency in Saudi Arabia noted that a call took place between Trump and the crown prince, but made no mention of Trump’s specific call on Saudi Arabia to cut production.
Trump also has said he will meet with U.S. oil and gas company executives Friday.
According to the American Petroleum Institute, U.S. crude inventories rose by 10.5 million barrels last week, well over twice what energy analysts had been expecting.
Low crude prices makes many drilling operations in the U.S. unsustainable, and in response companies have announced thousands of layoffs and furloughs. At the same time, for most consumers, falling oil prices are a blessing. Some stations are selling gasoline for less than $1 a gallon, though the national average is closer to $2, and many Americans staying home won’t see a benefit from low gas prices.