WASHINGTON (Reuters) – The United States does not know formal details of Saudi Arabian and Russian plans to reduce oil supply yet and will not ask U.S. domestic oil producers to chip in with their own cuts, a senior administration official told Reuters on Thursday.
FILE PHOTO: The sun sets behind a crude oil pump jack on a drill pad in the Permian Basin in Loving County, Texas, U.S. November 24, 2019. REUTERS/Angus Mordant/File Photo
Earlier, President Donald Trump said in a tweet that he expected Saudi Arabia and Russia to cut approximately 10 million barrels from daily production, a comment that sparked a jump in oil prices following weeks of steep declines.
The official said details of planned reductions remained unclear, but a big cut was expected.
Trump was set to meet with leaders of U.S. oil companies on Friday. He will discuss domestic production cuts but will not ask executives to agree on a coordinated drop in supplies, said the official, who spoke on condition of anonymity.
The official said the United States cannot orchestrate a mandated cut in domestic production. Trump has emphasized U.S. energy independence, approval of pipelines, deregulation and less stringent environmental standards as part of his push to build up the industry.
U.S. companies had already cut production in response to a collapse in market demand and as storage space filled up, the official said.
Global oil prices have tumbled by roughly two-thirds this year as the coronavirus slammed global economies even as Saudi Arabia and Russia flooded the market in a price war. Crashing prices have threatened the once-booming U.S. drilling industry with bankruptcies and massive layoffs, and Washington has scrambled to protect the sector.
The official described Trump as a broker between Saudi Arabia and Russia, calling their leaders multiple times to help solve the impasse. The president was in a good mood about the developments, he said.
Trump on Wednesday had suggested he knew a way to solve the problem with Russia and Saudi Arabia if the two countries did not reach a deal, but declined to elaborate.
“I do believe there’s a way that that can be solved or pretty well solved. And I’d rather not do that. I think that Russia and Saudi Arabia, at some point, are going to make a deal in the not-too-distant future,” he told reporters on Wednesday.
The official said tariffs on imported crude oil had come up as a potential solution to help domestic producers but indicated they were not under serious consideration. It would be difficult to impose tariffs when transactions were down, he said.
The government was also considering suspending royalty payments on oil production on federal property to help domestic suppliers, the official said.
Separately, the U.S. Department of Energy on Thursday announced it would lease out space to U.S. oil producers to store oil in the nation’s emergency stockpile, to help them with a shortage of available commercial storage capacity.
The official predicted a shakeout within the U.S. oil industry, in which an output boom in recent years has made the United States the top global producer of oil and gas.
Whether the government will provide financial support to mid- and small-sized oil companies remained to be seen, he said. The official noted bigger suppliers generally squeeze out the smaller ones.
Reporting by Jeff Mason; editing by Richard Valdmanis, Chizu Nomiyama and David Gregorio