Data released by the federal Energy Information Administration this week showed gasoline demand in the U.S. plummeting and oil inventories surging.
President Donald Trump tweeted on Thursday that Saudi Arabia and Russia appeared to be close to curbing their oil production, a potential lifeline for the U.S. oil sector that has been buffeted by plummeting energy demand from the coronavirus and a flood of crude exports from the two countries.
“Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!“ Trump tweeted.
Trump’s statement extended a rally in oil prices Thursday morning, adding about $5 to the earlier gains and lifting prices on the U.S. futures market briefly above $27 a barrel.
Saudi Arabia, in its own message, was more circumspect, only saying it sought a meeting of OPEC and other countries to discuss “a desired balance to the oil market.”
Trump’s tweet comes as the Department of Energy and Interior Department prepare to send President Donald Trump a menu of options the administration could take to provide relief to the domestic oil industry ahead of a Friday meeting with energy CEOs, according to industry officials briefed on the issue.
The list of options for Trump are expected to contain measures that Republican lawmakers recommended to Interior Secretary David Bernhardt this week, including suspending royalty payments for oil produced on federal lands and the extension of federal lease terms. It may also include suspending the Jones Act, which prevents ships that are foreign owed, flagged or crewed from transporting products between U.S. ports, as well as leasing out storage space in the Strategic Petroleum Reserve to companies, the people said.
A group of small and mid-sized companies have been asking the Interior Department to present those options to Trump, one of the people involved in the discussions said.
The White House meeting on Friday will include Harold Hamm, a Trump donor and the founder of oil producer Continental Resources who has been pitching oil import restrictions. But also attending the meeting are the chief executives from Exxon Mobil, Chevron and other large multi-national companies that have been arguing that no direct relief to the oil industry is needed.
A White House spokesperson declined to comment. An Interior Department spokesperson did not reply to questions.
One industry official described the options being considered as “minor odds and ends” that did not solve the main problems leading to the current market woes.
Data released by the federal Energy Information Administration this week showed gasoline demand in the U.S. plummeting and oil inventories surging, evidence that the measures to fight the coronavirus pandemic had sharply hit energy consumption.
On Monday, Whiting Petroleum became the first major U.S. casualty of the price drop, as the company that is a major producer in the Bakken shale in North Dakota filed for bankruptcy protection.
While most of the U.S. shale oil production is on private land and would not be affected by any royalty relief or lease extension, nearly two million barrels per day of U.S. oil comes from offshore fields that are leased from the federal government. Those offshore producers, particularly the smaller and medium-sized firms, are especially vulnerable during the market downturn, said one of the industry officials, who feared the large oil companies attending Friday’s White House meeting may not take their issues into account.
“It is likely that the one thing that can save the offshore independent companies is royalty relief and it will likely not be raised by the current participants,” the person said. “Our concern is the president makes a decision based on this meeting and thinks he saved the oil and gas industry and moves on to dealing with the coronavirus and the myriad of other crises he is dealing with.”
Meanwhile, Republican senators from energy states continued to pressure the administration to aid the industry. Senate Energy Chairman Lisa Murkowski (R-Alaska) sent a letter to Treasury Secretary Steven Mnuchin asking to ensure federal assistance is available to U.S. oil and gas companies during implementation of coronavirus relief legislation.
“It is important that the CARES Act be implemented in a way that provides critically needed liquidity and financing to American businesses, including the oil and gas producing companies that form the backbone of our national and energy security,” Murkowski wrote.