The Strategist

US pushes on Saudi Arabia to restrict oil production amid crisis

03/20/2020 - 08:58

Washington is increasing pressure on Saudi Arabia, trying to push Riyadh to limit oil production in a situation where the collapse in world prices is increasingly affecting the American economy. The US believes that America has fallen victim of the Russian-Saudi oil war. At that, opponents of US President Donald Trump accuse him of unjustified support for Saudi Crown Prince Mohammed bin Salman Al Saud, whose actions caused a market collapse and created serious problems.

Saudi Arabia, chairing the association of the 20 leading world economies, will hold an emergency G20 summit online in the coming days, designed to coordinate measures to stabilize the world situation in connection with the coronavirus epidemic. This was reported in the press service of the Prime Minister of Spain, Pedro Sanchez, following a telephone conversation with the Crown Prince of Saudi Arabia, Mohammed bin Salman, indicating that communication between world leaders could be held without their personal presence.

Meanwhile, against the backdrop of the spread of the coronavirus pandemic, the second destabilizing factor in the world was the situation on the oil market, caused by the failure of negotiations with Russia to extend the OPEC + agreement expiring on March 31, as well as the sharp increase in oil production carried out by Saudi Arabia in recent weeks.

After negotiations with Moscow ended in vain, Riyadh has been waging the most aggressive price war since 1986, judging by the speed at which additional volumes are offered to the market.

So, producing less than 10 million barrels per day, the kingdom is going to increase production to 12.3 million barrels per day from April 1, after the OPEC + transaction is officially closed.

Riyadh also intends to reduce the load on its refineries in order to send more oil for export. To find a place on the market for this oil, Saudi Arabia offers substantial discounts to those customers who previously bought Russian Urals oil. All this is happening against the backdrop of an unprecedented drop in oil demand due to the coronavirus pandemic.

In a situation of a double blow to the global economy by the coronavirus epidemic and the cheap Saudi oil that rushed to the market, a group of influential American senators called on Crown Prince of Saudi Arabia Mohammed bin Salman to take urgent measures to reverse the negative trend that threatens US national interests. The appeal of 13 Republican senators was part of Washington’s diplomatic efforts, convincing a key ally in the Persian Gulf to abandon oil production and become a guarantee of hydrocarbon market stability.

“While the United States and the rest of the world, including Saudi Arabia, are fighting the coronavirus pandemic, the unsettled situation in global energy markets is becoming an additional undesirable factor. The United States has always been a strong and reliable partner of the Saudi kingdom for decades. Given this, our deep concern is the decision of the Ministry of Energy of Saudi Arabia to lower crude oil prices and increase production. In a situation where financial markets were already hit hard, the fall in oil prices caused the maximum destabilization of the global economy,” the statement reads.

“Senior Saudi politicians have repeatedly told US officials, including us, that Saudi Arabia is a stabilizing force in global markets. However, the recent actions of Saudi Arabia make one doubt this. In this regard, we call on the kingdom to show its constructive leadership to stabilize the global economy and calm the situation in the oil and gas industry, when countries around the world are struggling with the pandemic,” the US senators summarize.

Earlier, Republican Senator Kevin Cramer wrote a letter to U.S. President Donald Trump, expressing bewilderment at his too mild approach to the Saudi prince and calling for pressure on Riyadh. “Unfortunately, Russia’s intimidation tactics have become the norm, but the actions of our close strategic partner Saudi Arabia are of particular concern,” said Mr. Cramer. He called on President Trump to impose an oil embargo on Russia, Saudi Arabia, and “other OPEC countries such as Iraq.”