Last minute negotiations by President Trump secured a 23-nation agreement to cut global oil production and potentially revive a struggling U.S. oil industry.
The United States has pushed Russia and Saudi Arabia for weeks to end a price war that, along with the coronavirus pandemic, drove global oil prices to an 18-year low at the end of March. The deal is the largest oil production cut ever negotiated, equaling about 10 million barrels of oil a day, or 13% of global oil production, according to The Wall Street Journal.
Trump touted the agreement of OPEC+, supported by the 13-member Organization of the Petroleum Exporting Countries and 10 other nations, on Sunday.
“The big Oil Deal with OPEC Plus is done. This will save hundreds of thousands of energy jobs in the United States. I would like to thank and congratulate President Putin of Russia and King Salman of Saudi Arabia. I just spoke to them from the Oval Office. Great deal for all!” Trump tweeted.
The big Oil Deal with OPEC Plus is done. This will save hundreds of thousands of energy jobs in the United States. I would like to thank and congratulate President Putin of Russia and King Salman of Saudi Arabia. I just spoke to them from the Oval Office. Great deal for all!
— Donald J. Trump (@realDonaldTrump) April 12, 2020
The president followed up with a pair of tweets on Monday asserting that the cuts agreed to are more than double what OPEC stated in a Sunday press release.
“Having been involved in the negotiations, to put it mildly, the number that OPEC+ is looking to cut is 20 Million Barrels a day, not the 10 Million that is generally being reported,” Trump said.
“If anything near this happens, and the World gets back to business from the Covid 19 disaster, the Energy Industry will be strong again, far faster than currently anticipated. Thank you to all of those who worked with me on getting this very big business back on track, in particular Russia and Saudi Arabia,” Trump concluded.
….disaster, the Energy Industry will be strong again, far faster than currently anticipated. Thank you to all of those who worked with me on getting this very big business back on track, in particular Russia and Saudi Arabia.
— Donald J. Trump (@realDonaldTrump) April 13, 2020
By Thursday, the deal had been in large part agreed to, but a late objection by Mexico seeking a lower cut in oil production threatened to scuttle the agreement. Trump called Mexican President Andrés Manuel López Obrador and Saudi Arabia, salvaging the deal by promising that the United States’ drop in oil production would cover the difference for Mexico. Trump said that Mexico would “reimburse us at a later date” on Friday.
Unlike Saudi Arabia and Mexico, the United States does not have a state-owned oil company, so experts were initially unsure of how the U.S. planned to cut oil production. Energy Secretary Dan Brouillette said on Sunday that the cuts to U.S. production come from market projections by the Energy Information Administration, which expects U.S. oil production to fall by 2 million barrels a day by the end of 2020, according to The Washington Examiner.
“While it’s important to members of OPEC that they have mandates cuts, we don’t have that system in the United States,” Brouillette said.
While Trump and the oil industry celebrated the deal, the agreement may not be enough to revive the U.S. domestic oil industry as the coronavirus and state stay-at-home orders continue to keep people inside and depress demand for fuel.
The agreement also staves off U.S. oil tariffs Trump threatened on April 5. The president said at a press conference that he would consider placing tariffs oil on Saudi Arabia and Russia to revive the U.S. oil industry if the two countries did not end their price war.