April 06, 2020 [Newsweek – Published on April 01, 2020] – President Donald Trump said Russia and Saudi Arabia are in discussions over how to end the oil price war that has undermined global markets and pushed American producers to the brink of bankruptcy.
Trump spoke with Russian President Vladimir Putin on Monday in a wide-ranging call during which the oil war was discussed, according to Bloomberg. The price dispute, which began last month, has driven oil prices to their lowest in 18 years.
Trump told reporters Tuesday that Russia and Saudi Arabia “are discussing” how to end the price war, adding that he would consider “joining at the appropriate time if need be.” The president added that he had “great” talks with both Putin and Crown Prince Mohammed bin Salman about the situation.
Russia had been cooperating with the OPEC cartel for three years under the OPEC-Plus deal, until they split over proposed production caps in March. The caps were designed to boost oil prices, which had fallen due to the global economic slowdown precipitated by the novel coronavirus, particularly in Asia.
Russia refused, prompting the Saudis to up production and flood the market with oil, hoping that the subsequent plummeting prices would force Moscow to back down. The Russians have maintained their position, though have indicated that the OPEC-Plus deal could be resurrected as a way to end the costly dispute.
Meanwhile, U.S. producers have been cutting operations and pressuring lawmakers to support struggling firms, and calling for the president to intervene and help settle the conflict. U.S. shale production has upended global oil markets in recent years, making the country the world’s leading producer.
But much of that growth has been achieved on a foundation of debt and low prices threaten to push some of the smaller American producers out of the market entirely.
The price of Brent crude — one of the two major benchmarks for global oil prices — fell as low as $22.58 dollars per barrel on Monday, down from above $63 in January. Credit ratings agency S&P has warned that global oil prices could fall as low as $10 per barrel this year.
Meanwhile, the production increase has left firms lacking the space to actually store the product being extracted. According to industry analyst IHS Markit, the first half of 2020 will see an increase of 1.8 billion in global oil inventories, though there is only storage space for some 1.6 billion. This could force production cuts by June, the firm said.
But the turmoil has at least helped American consumers, who are facing an unprecedented economic crisis thanks to the coronavirus pandemic. The average price of a gallon of gas fell below $2 this week—the lowest in four years according to the American Automobile Association. Earlier this month, the president wrote on Twitter that the downward trend was “good for the consumer.”
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