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 U.S. President Donald 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 U.S. and European producers not allied with the cartel can pull back 4 million barrels a day of output, according to delegates at Thursday’s meeting. But there is confusion about whether such reductions could be coordinated or would simply reflect forced shutdowns amid deteriorating demand.
‘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 ImagesOne solution under consideration: Countries could buy millions of barrels of crude and store it 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 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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