The United States is calling on Saudi Arabia to reconsider its plan of flooding the market with its oil in an effort to gain market share from Russia. Global oil prices are already at their lowest level since the turn of the century, a direct result of the oil price between Russia and Saudi Arabia and the ongoing viral pandemic spreading across the world.
The Trump administration made the call on Wednesday, asking Saudi Arabia to halt its plans of ramping up its production to a record 12.3 million barrels a day of oil next month. US officials are trying to negotiate for the country to help in bringing oil prices back up to levels before the market crashed earlier this month.
Following the collapse of the pact between Russia and Saudi Arabia to control production, global oil prices have been on an ongoing freefall. Coupled with the declining demand due to the viral outbreak, oil prices have so far dropped below the $30 per barrel threshold.
Hundreds of businesses and thousands of jobs in the US and abroad are now under threat. In the US, experts estimate that more than 70 percent of shale drillers could go bankrupt if the situation does not improve. Oil prices remained unchanged throughout the week, sitting around $27 per barrel.
On Wednesday, US Secretary of State Michael Pompeo asked Saudi Arabia to "rise to the occasion" in helping stabilize the global energy market during these times of great uncertainty. Pompeo also revealed that he had already spoken to Crown Prince Mohammed bin Salman regarding the issue during a conference call with the leaders of the Group of 20 to discuss the economic effects of the coronavirus outbreak.
The State Department explained that as a leader of the G20, Saudi Arabia is in a unique position to stabilize the global energy markets, which will in turn bolster the global economy. US officials have stated that the oil price crash has only managed to exacerbate the already worsening situation caused by the viral epidemic. The country is now calling on everyone to work together in the face of serious economic uncertainty.
Former White House official, Jason Bordoff, mentioned that diplomacy will play a key role in resolving the current issue. Republicans and Democrats in the country will have to work together to convince Saudi Arabia to support the global economy during the crisis.
Despite the US' call, analysts predict that Saudi Arabia likely has no plans of changing its course of action. Even if it did, it would require the country and Russia to collectively reduce their output to zero to balance the market. Sources familiar with the matter stated that Saudi Arabia will unlikely listen to the request given how Trump had publicly celebrated the plunge in oil and gas prices.
