Energy diplomats are on overdrive, seeking to bring an end to the senseless global crude oil war.
Russia and Saudi Arabia have flooded the market, driving down oil prices.
A G20 virtual meeting of energy leaders is being urged, with International Energy Agency executive director Fatih Birol reportedly propelling the idea.
Former U.S. Energy Information Agency administrator Adam Sieminski, who heads the King Abdullah Petroleum Studies and Research Center in Riyadh, is also apparently involved in the process.
Whether the initiative succeeds is still to be seen. There are plenty of skeptics who think overcoming this crisis of demand destruction through crude oil output cuts is impossible at this stage.
No agreement is possible without the involvement of the world’s largest producer: the United States. For years, the U.S. has firmly declined to be part of any such arrangement. Now it seems it has little option.
But without the U.S. offering enticements to both Russia and Saudi Arabia, no change in the current circumstances seems likely.
Russia has resolutely refused to make a deal with the U.S. It doesn’t want to yield further market share to U.S. shale oil producers, who have higher production costs and so need higher benchmark prices.
Saudi Arabia, meanwhile, doesn’t want to unilaterally shoulder the burden of balancing the markets without the active support of Russia.
Both countries certainly aspire to tame down U.S. shale oil production. Politically, however, the Saudis are in no position to publicly target U.S. shale output the way Russia has.
But the Saudis certainly realize that balancing the market means getting U.S. production in check.
For almost four years, the U.S. administration has remained aloof from the output management regime, firmly rejecting joining the producers’ club to curb output.
In fact, U.S. President Donald Trump criticized the Organization of Petroleum Exporting Countries (OPEC) whenever crude prices rose beyond a certain level.
But market dynamics have changed and demand destruction is taking its toll.
Whether the U.S. formally joins a decision to curb output or not, its output is under threat. In order to salvage at least a part of its shale output, it desperately needs to stabilize the markets and put a floor beneath prices.
So formally or informally, the U.S. will be part of any reconciliation.
Leading the American initiative is Texas, the state with the largest hydrocarbon output and reserves. Pioneer Natural Resources and Parsley Energy, two of Texas’s leading crude producers, have asked state regulators for an emergency meeting to consider curbs on output, since the cratering oil market threatens to bury much of the industry.
A five-page letter signed by the chief executives of both companies said they want a meeting no later than April 13 with the three-member Railroad Commission of Texas, the body responsible for managing oil affairs in the state.
Commissioner Ryan Sitton later said the regulating body would discuss oil output curbs at the next meeting.
American desperation to stem the crude price rot is setting in to keep the shale oil revolution moving. Trump is talking to Russian President Vladimir Putin and Prince Mohammed bin Salman of Saudi Arabia, urging them to act in unison to improve market dynamics.
Active U.S. participation in any arrangement would be a defining moment in the history of the global crude oil market.
The terms of any agreement are obvious.
Could Putin or bin Salman yield from their positions without the U.S. participating in curbing output?
That’s impossible, improbable and illogical. Trump has to be a part of the equation – covertly or overtly.
Who will blink first?
Toronto-based Rashid Husain Syed is a respected energy and political analyst. The Middle East is his area of focus. As well as writing for major local and global newspapers, Rashid is also a regular speaker at major international conferences. He has been asked to provide his perspective on global energy issues by both the Department of Energy in Washington and the International Energy Agency in Paris.