Oil execs strategize with Trump

White House’s help sought to calm roiling global markets

Vehicles line up for lower priced gasoline Thursday in Lakeville, Minn., with reports of some stations selling gasoline for under $1 a gallon as oil prices have dropped. The average price Friday in Arkansas was $1.68, according to travel club AAA.
(AP/Jim Mone)
Vehicles line up for lower priced gasoline Thursday in Lakeville, Minn., with reports of some stations selling gasoline for under $1 a gallon as oil prices have dropped. The average price Friday in Arkansas was $1.68, according to travel club AAA. (AP/Jim Mone)

The OPEC oil cartel and Russia are pressing to form a global coalition to cut output and stem the historic rout in crude prices, with a deal balancing on a key meeting Friday between U.S. President Donald Trump and American oil executives. Crude surged on the efforts.

Trump touted the idea of global cutbacks Thursday, and it looks to be gaining traction. Russian President Vladimir Putin, in a meeting Friday with Russia's oil-industry bosses, said trimming global oil production by about 10 million barrels from first-quarter levels is possible. That figure was first mentioned by Trump as he called for a coordinated effort.

Putin said Russia is in "close contact" with Saudi Arabia, and had contacts with the U.S.

A meeting of delegates from OPEC and Russia has been scheduled for Monday as the coronavirus pandemic knocks out as much as a third of global demand. At the same time, the oil-price slump threatens the budgets and political stability of oil-dependent nations, the existence of the U.S. shale industry and millions of jobs in a sector already in turmoil.

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In Washington, petroleum chief executives, including U.S. oil-patch loyalists to Trump, sought White House help Friday in calming roiling global oil markets amid threats to America's years-long fracking boom and the global pandemic.

Executives of Chevron, Exxon and other large and medium-size petroleum companies and industry trade groups, as well as Republican lawmakers, met with Trump in hopes of hammering out a U.S. response as ramped-up oil and gas production from Saudi Arabia and Russia and the pandemic pushed oil prices well below $30 a barrel.

"We'll work this out," Trump promised the executives.

No action on the oil crisis was immediately announced at Friday's gathering -- other than Trump offering to use his position to try to get the oil executives tests for coronavirus, if they chose.

"Would anybody like to be tested?" Trump asked. "We might be able to do that."

There are deep divisions among the various factions over what should be done, especially on the question of possible tariffs on Saudi Arabian oil, which may force Trump to make a difficult decision that could hurt some executives who are among his most ardent supporters.

"We'll get our energy back," Trump said during a portion of Friday's meeting that was open to reporters. "I'm with you 1,000%. It's a great business, it's a very vital business, and honestly, you've been very fair. You've kept energy prices reasonable for a long period of time."

On Thursday, Trump talked of working with Saudi Arabia and Russia to try to persuade them to ease up on pumping and back off their price war, which threatens more expensive U.S. shale oil production. The two countries "are fighting over this, and as everybody knows, it's, you know, really killing an industry," Trump said.

One oil industry expert urged White House and oil company executives to focus on dealing with looming domestic problems from the oil market crisis, pointing to the possibility of U.S. disruptions in diesel fuel for supply trucks -- trucks that Americans homebound by the pandemic increasingly depend upon -- amid the market chaos.

"This really requires ... a national coordinated response," said Amy Myers Jaffe, director of the Council on Foreign Relations energy security program. "You have to think about national security."

Oil companies were expected to pitch wildly varying actions to the administration. Some Republican lawmakers and small and medium-size oil companies are asking for measures including an oil embargo on Saudi Arabia, or tariffs and other punitive measures to persuade the Gulf kingdom to stop flooding the global market with oil and driving down prices.

Harold Hamm, executive chairman of the shale oil company Continental Resources -- and a Trump supporter, donor and informal adviser -- also asked the Commerce Department to investigate what he contends is illegal dumping of below-cost crude oil onto the market by Saudi Arabia and Russia.

Small and medium oil producers want Trump to press global mediation to encourage major producers to ease back on pumping. That would probably take pledges from U.S. producers to ease pumping as well, something it's not clear they're willing to do.

One oil industry regulator in Texas, Ryan Sitton, has been floating the idea of production caps and reaching out to leaders from OPEC and Russia, suggesting that offering to cut production in some way might be a negotiating chip the U.S. could bring to the table.

Oil giants, meanwhile -- with cash reserves that smaller producers don't have -- have been more willing to let the markets run as they will, knowing they are in better position to ride it out.

The American Petroleum Institute, which represents oil and gas producers as well as refineries, said in a letter to Trump that the group does not want the administration to take any steps that would restrict oil supply.

"Imposing supply constraints, such as quotas, tariffs, or bans on foreign crude oil would exacerbate this already difficult situation, jeopardize the short and long-term competitiveness of our refining sector world-wide, and could jeopardize the benefits Americans experience as a result of our increasing energy dominance," the group said in a letter signed by Chet Thompson, president and CEO of the American Fuel & Petrochemical Manufacturers, and Mike Sommers, president and CEO of the American Petroleum Institute.

Benchmark crude oil rose $3.02 to settle at $28.34 a barrel Friday. Brent crude oil, the international standard, rose $4.17 to $34.11 a barrel.

Information for this article was contributed by Ellen Knickmeyer, Cathy Bussewitz and Brian Slodysko of The Associated Press, and by Jennifer A. Dlouhy, Stephen Cunningham, Jordan Fabian, Grant Smith, Javier Blas and Olga Tanas of Bloomberg News.

Business on 04/04/2020

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