April 13, 2020

U.S., G-20 Work To Address Concerns About Oil Production

Last week, Connecting the Dots reported that MSCI and the Energy Equipment and Infrastructure Alliance (EEIA) sent a letter to President Donald Trump asking that his administration take action to keep Saudi Arabia and Russia from dumping crude oil onto global markets after the two countries announced they would flood the global market.

A few days later, nearly 50 U.S. House Republicans asked Saudi Arabia to take immediate steps to cut output and stabilize global oil markets or else risk damage to the bilateral relationship.

The White House also appears to be responding to the EEIA’s call. President Donald Trump last week said he spoke to leaders of both countries and, on April 8, the two nations announced a tentative plan to cut production.

Then last week, the Organization of the Petroleum Exporting Countries (OPEC) and allies tentatively reached a deal on coordinated oil production cuts of 10 million barrels per day. Over the weekend, energy ministers from the Group of 20 major economies continued to meet to discuss those potential cuts and, on Sunday, April 12 announced a final output agreement that calls for countries to cut production by 9.7 million barrels a day.

Despite the agreement, as Politico explained, “While the pledged cuts could help stabilize crude prices that have fallen by more than $30 since the beginning of the year to the lowest levels since 2002, the reductions aren’t expected to offset the huge drop in fuel demand from the efforts to contain the coronavirus pandemic.”

Politico also reports Sen. Bill Cassidy (R-La.) plans to introduce legislation would impose tariffs on oil imports from Saudi Arabia to ensure the price of Saudi imports does not drop below $40 per barrel. Reuters has more information on the legislation.