President Trump said he and the leaders of Russia and Saudi Arabia had ‘a big talk’ about oil production and that he wants to avoid oil-industry layoffs.
Photo: Doug Mills/Bloomberg NewsA virtual summit of Group of 20 energy ministers Friday is tackling the question of how industrialized nations can help resolve an unprecedented oil glut partly triggered by the coronavirus pandemic. Producers are pinning their hopes on President Trump, who has emerged in recent weeks as a top diplomatic presence in oil market talks.
The virtual meeting comes after an alliance of producers including the Saudi-led Organization of the Petroleum Exporting Countries failed Thursday to complete a collective oil truce with Russia and other oil-producing nations. In that gathering, Mexico refused to join production curbs, putting the broader international agreement in jeopardy.
At the G-20 meeting, Mr. Trump will be represented by Energy Secretary Dan Brouillette, who has been the administration’s point man in its efforts to help resolve a month-long oil-price war between Saudi Arabia and Russia. Behind the scenes, the president has been making frequent late-night phone calls to Russian President Vladimir Putin, King Salman of Saudi Arabia and other key players in the oil market.
The role of oil-world peacemaker is an unusual one for Mr. Trump. Although he is leader of the world’s biggest oil-producing—and oil-consuming—nation, he has been a longstanding critic of cartel-based efforts to boost prices.
“We leave it to Trump to sort it out,” said a delegate who attended Thursday’s failed producers’ call. “He is the best OPEC negotiator today.”
On Friday, Mexican President Andrés Manuel López Obrador said a phone call with Mr. Trump convinced him to cut output. Hours of talks with OPEC the previous day had failed to bring him on board.
Mexican President Andrés Manuel López Obrador said a phone call with Mr. Trump convinced him to cut output.
Photo: jose mendez/ShutterstockMr. López Obrador said Mr. Trump had promised him the U.S. would cover two-thirds of the production curbs the cartel had demanded of Mexico. OPEC delegates and people close to the Trump administration said they hadn’t been informed of the offer and it was unclear how it would be implemented.
The Trump administration has refused so far to formally take part in any oil output cuts and has said output reductions will happen due to the coronavirus’s erosion of oil demand.
“Everyone is going to have to reduce production as long as we have this demand curve being what it is,” Mr. Brouillette told broadcaster CNBC on Thursday. “There is simply no other choice.”
In a statement Friday, Mr. Brouillette said U.S. production will fall by nearly 2 million barrels a day by the year’s end. He added that some estimates put the decline at up to 3 million barrels a day.
Before speaking to the Mexican president, Mr. Trump said he spoke with Mr. Putin and King Salman on Thursday. He said the three leaders had “a big talk” about oil production, adding that he wants to avoid layoffs in the oil industry both in the U.S. and abroad.
OPEC also expects Friday’s G-20 meeting to show that the U.S., Canada, the U.K. and other European producers not allied with the cartel can pull back 4 million barrels a day of output, according to delegates at Thursday’s meeting. OPEC and its allies including Russia are trying to complete a deal that would have them cut 10 million barrels a day of production. The broader combined effort could lead to at least 14 million barrels a day.
‘Everyone is going to have to reduce production as long as we have this demand curve being what it is,’ U.S. Energy Secretary Dan Brouillette said.
Photo: Drew Angerer/Getty Images“The success of [OPEC Plus’s] historic agreement depends on the full and timely participation of all producers,” the cartel’s secretary general, Mohammed Barkindo, told the G-20 Friday. “Everyone has a responsibility to play their part.”
In a presentation to the G-20 seen by The Wall Street Journal, Mr. Barkindo said global demand is expected to collapse this month by 20 million barrels a day and commercial oil stocks in industrialized nations were set to reach their limit sometime this quarter if no action is taken.
There is confusion about whether such reductions could be coordinated or whether they can simply reflect shutdowns that result from deteriorating demand. But the unprecedented scale of the oil crash has effectively put the Trump administration in a seat normally occupied by OPEC: a global attempt to mend a broken oil market.
For decades, Mr. Trump has been a vociferous opponent of the cartel, deeming its efforts an evil force that squeezed American motorists. But the price war between Saudi Arabia and Russia threatened a vibrant U.S. oil industry and led to what seemed to be a change of heart.
“I hated OPEC. You want to know the truth? I hated it, because it was a fix,” the president said Wednesday. “But somewhere along the line that broke down and it went the opposite way. And we have a tremendously powerful energy industry in this country now…and I don’t want those jobs being lost.”
Yet, on behalf of Mr. Trump, Mr. Brouillette has lobbied producers to turn the G-20 into an arena for oil-production talks rather than the OPEC Plus alliance, according to people familiar with the matter. Both forums are currently led by Saudi Arabia.
In the past, Washington has mostly sought the help of Saudi rulers when it needed to respond to supply shocks and frowned upon talks with Russia. But last month, the oil-market dialogue broke down between Moscow and Riyadh, prompting a price war between them. Senior State Department officials realized the president needed to call Mr. Putin, according to people familiar with the matter. That prompted Mr. Trump to reach out to the Russian leader on March 31—the first time the two men had held talks to mend the oil market.
Moscow is now warming up to the idea of using the G-20 and not just OPEC as a vehicle for oil talks. Russian energy minister Alexander Novak on Friday proposed creating a monitoring committee within G-20 to ensure the stability of energy markets.
Other than reducing supplies, the G-20 is looking at another solution: Countries could buy millions of barrels of crude and store them in national reserves to stimulate demand and put a floor on prices. The mechanism could bail out embattled oil companies, according to people familiar with the matter
The U.S. is opening its Strategic Petroleum Reserve to “take surplus oil off the market at a time when commercial storage is filling up and the market is oversupplied,” Mr. Brouillette said.
The International Energy Agency—a group representing top oil consumer countries—is backing a push to coordinate such purchases with the U.S. and other industrialized nations to assess crude purchase to fill up strategic inventories, these people said.
—Anthony Harrup and Georgi Kantchev contributed to this article.
Write to Summer Said at summer.said@wsj.com, Benoit Faucon at benoit.faucon@wsj.com and Timothy Puko at tim.puko@wsj.com
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