WASHINGTON (Reuters) – U.S. Energy Secretary Dan Brouillette said on Monday that after speaking with the energy ministers of Saudi Arabia and Russia he believes the countries will cut oil output and end their war over market share this week.
By Timothy Gardner
“They are going to get together later this week and hopefully end this disagreement that started perhaps two or three weeks ago,” Brouillette told Fox Business Network.
When asked if he believes major producers Russia and Saudi Arabia would agree to participate in an oil production cut of between 10% to 15% of global oil supply, he said, “yes, I do.”
Oil prices have plummeted as demand crumbled on global economic shutdowns during the coronavirus outbreak, and as Saudi Arabia and Russia have pumped oil flat out in a war for market share. [O/R]
Oil prices fell sharply on Monday after Saudi Arabia and Russia delayed a meeting on oil markets. The Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, are now expected to meet on Thursday.
President Donald Trump has said a deal could see cuts of 10% to 15% of global supply, although analysts say even such a huge reduction would not address the problem of global demand which has slumped as much as 30 million barrels per day during the coronavirus outbreak.
Brouillette said the United States is encouraging Saudi Arabia, chair of the G20 this year, to convene a G20 energy ministerial meeting toward the end of the week “and I expect that that’s going to happen.”
Brouillette spoke to Saudi counterpart Prince Abdulaziz bin Salman at the weekend, telling him the battle for market share has “major implications” for the United States and the world, the U.S. Energy Department said.
Many highly leveraged U.S. shale drillers risk bankruptcies and oil workers face layoffs.
Brouillette said some U.S. lawmakers saw Russia and Saudi Arabia’s moves to boost output as “predatory.”
“Some saw the actions to increase production … as a direct attack on the U.S. shale industry,” Brouillette told Fox. Two Republican U.S. senators from energy producing states introduced in late March a bill requiring removal of all U.S. troops and equipment from Saudi Arabia including Patriot missiles and THAAD defense systems, but the legislation faces an uphill battle.
Brouillette also said the U.S. energy industry will have to adjust accordingly to reduced demand from the coronavirus outbreak. Trump has directed Brouillette to fill the U.S. Strategic Petroleum Reserve by leasing the remaining 77 million barrels of space in the facility.
Brouillette said the department is looking for additional capacity, including commercial, to store oil at current low prices. But it was uncertain how much additional storage space was available. Under law, the United States is to store up to 1 billion barrels of emergency oil, well above current levels of 635 million barrels.
Reporting by Timothy Gardner, additional reporting by Susan Heavey; Editing by David Goodman, Steve Orlofsky and David Gregorio
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