The US is not directly participating in tomorrow's emergency Opec+ meeting, but Washington is hoping foreign producers will take into account the expected decline in US crude output as they discuss their own production cut commitments.
"It does not make sense that they flooded the market," President Donald Trump said today, pointing to a dispute between Russia and Saudi Arabia that helped send crude prices crashing.
US producers have already made "automatic" production cuts, Trump said at a White House briefing, referencing the deep cuts to drilling budgets across the US oil and gas industry that the US Energy Department says will take 2mn b/d off the market.
Trump expressed confidence Russia and Saudi Arabia will be able to work out their differences. "They will straighten it out. A lot of progress has been made over the past week," he said.
What comes out of the Opec+ meeting will depend in part on whether Moscow and Riyadh accept the expected declines in the US output as an equivalent to production cuts they are considering. Russia said today it will take part in a new crude output restraint agreement on condition that the cuts are shared among all the participants.
The US has engaged in diplomacy with leading Opec+ members ahead of the meeting, both to communicate that the US is doing its part to address the supply glut without non-market interventions and to threaten potential reprisals, including a tariff on US crude imports from Opec+ countries.
In turn, a possible decision by Opec+ to reinstate production cuts will ease the administration's effort to offer economic relief to an industry that is core to Trump's message of energy dominance.
US oil and gas producers have been frustrated that the US administration has yet to approve royalty relief, which they say could make a key difference for independent shale producers and small offshore operators struggling from the collapse in crude prices that began a month ago. But critics say lifting royalties would run counter to global efforts to curb supply, since it would help keep production on line — going against the US message to Opec+ members that it is doing its part to stabilize oil markets.
"We have a lot of good options," Trump said, but added that "let us hope they make a deal."
The US plans to discuss oil market stability directly with Russia and Saudi Arabia on 10 April, a day after the Opec+ meeting, when Riyadh convenes a virtual G20 energy ministerial.
US energy secretary Dan Brouillette is scheduled to hold a teleconference tomorrow with his colleagues from Canada and Mexico to make a case for a coordinated approach on behalf of the largely integrated North American energy market.
Mexico, unlike Canada and the US, is taking part in the Opec+ discussion, even though it said it does not anticipate cutting production as part of a wider agreement. Notably, the government of Canadian province Alberta — the center of the country's oil industry — has accepted an invitation to participate in the Opec+ meeting tomorrow.
Texas Railroad Commission member Ryan Sitton, who over the past week has been arguing that the state regulator should join Alberta in the Opec+ meeting, said today he would not take part in the session. And he echoed the administration's line, predicting that US output could decline by as much as 4mn b/d.
The commission is planning a virtual hearing on 14 April to discuss curtailing the state's oil production at the request of two oil producers. The proposal is already getting pushback from others in the industry as well as business groups in the state.
The US and Canada have little federal authority to order nationwide production cuts. Ottawa can order such cuts in a national emergency. The US could order a shutdown of offshore production or curb exports. Neither option appears to be on the table.
