Washington — With capex cuts and layoffs looming for the shale patch, US lawmakers from top oil-producing states have appealed to Saudi Arabia to reconsider its plans to flood the market with crude - likely receiving a polite, but firm rebuff.
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The kingdom, which has said it intends to surge its crude exports and supply a record 12.3 million b/d to the market once its OPEC production quota expires at the end of March, shows no signs of backing off its price war against Russia.
Saudi Aramco "has already stated that they are maintaining April production levels into May, so it doesn't look like much can be done at this stage apart from economic pressures to play out in the oil market," said Faiza al-Husseini, vice president and lead geopolitical analyst for Saudi-based consultancy Husseini Energy.
The aggressive moves have caused oil prices to crater to 17-year lows this week, sparking panic in industry boardrooms, which have responded by dramatically slashing budgets and delaying projects.
That, in turn, has prompted several lawmakers from Texas, North Dakota, Alaska and other oil states to directly lobby Saudi Arabia, stressing the two countries' decades-long ties.
On Monday, 13 Republican senators sent a letter to Saudi Crown Prince Mohammed bin Salman calling the US a "strong and reliable partner" of the kingdom and appealing to the Saudis to be a "force for stability" in a global oil market already reeling from the coronavirus outbreak.
"We urge the kingdom to assert constructive leadership in stabilizing the world economy by calming economic anxiety in the oil and gas sector at a time when countries around the world are addressing the pandemic," the senators wrote.
Many of these senators further pressed the issue in a call Wednesday with Princess Reema Bandar al-Saud, the Saudi ambassador to the US.The Saudi embassy in Washington and the Saudi energy ministry in Riyadh did not respond to requests for comment.
TRUMP LIKES LOW PRICES
Relations between the two countries have been strained after the US' somewhat tepid response to the missile attacks on Aramco's critical Abqaiq crude processing facility in September, which officials have blamed on Iran, as well as January's assassination of key Iranian general Qasem Soleimani, which the US carried out without consulting Saudi Arabia.
The US Congress also adopted a hawkish stance towards Saudi Arabia after Washington Post columnist Jamal Khashoggi was murdered by Saudi agents in 2018, threatening the kingdom with sanctions and so-called NOPEC legislation accusing the Saudi-led OPEC of oil market manipulation.
With no satisfaction on oil prices coming from Saudi Arabia, Senator Kevin Cramer, a North Dakota Republican, on Wednesday wrote to President Donald Trump urging him to impose an embargo on oil imports from Saudi Arabia, Russia and other OPEC nations.
"We must send the immediate signal; the United States will not be bullied or taken for granted," Cramer wrote in his letter.
Trump has been noticeably absent from the senators' new lobbying campaign. Analysts say the president, who has not been shy about needling Saudi Arabia on Twitter about high oil prices, views the recent market rout as advantageous to his re-election in November.
The US is the world's leading consumer of gasoline, by far."The Trump administration, of course, can influence Saudi leaders, but
for the time being the president is enjoying tumbling pump prices," said Bob McNally, president of Rapidan Energy Group and a former energy adviser to President George W. Bush.
While Cramer said that oil state senators will "continue pressuring and advocating for a course correction from the Saudis," analysts said the effort will likely result in little, if any, action.
"If the US wants to pressure the Saudis, the president should get on the phone and tell them that the president's personal relationship with the king depends upon it," said Ellen Wald, who heads Transversal Consulting and has written a book on Saudi Aramco. "But it isn't clear that the president wants to do that or sees it as a priority right now."
Trump's focus for now appears to be on the domestic front.
On Friday, the president announced that the US government would buy crude to fill the Strategic Petroleum Reserve "right up to the top" to stimulate demand.
The Department of Energy on Thursday issued a solicitation to purchase up to 30 million barrels from small to midsize US oil producers for the reserve and said more will follow.
"The small to midsize oil producers, which are the focus of the initial crude oil purchase, employ thousands of Americans," Under Secretary of Energy Mark Menezes said. "These businesses have been particularly hard hit by recent events."
Other measures under consideration to help US producers include broad tax breaks or limits on foreign crude imports.
Sara Vakhshouri, president of SVB Energy International, said the danger for Trump is if prices stay low, while demand does not recover because of the coronavirus, the US economy could be seriously damaged heading into the election.
"The market is still not sure how low the prices could go and for how long," Vakhshouri said. "These are very important factors that could impact the US and Trump's response."