London — The US is urging Saudi Arabia to back off its oil price war with Russia, with Secretary of State Mike Pompeo calling Crown Prince Mohammed bin Salman on Tuesday.
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The official Saudi Press Agency said the two "reviewed exerted efforts to maintain stability in the global energy markets."
The US State Department's readout of the call said that Pompeo "stressed that as a leader of the G20 and an important energy leader, Saudi Arabia has a real opportunity to rise to the occasion and reassure global energy and financial markets when the world faces serious economic uncertainty."
The call came ahead of a G20 leaders videoconference that Saudi King Salman bin Abdulaziz, who holds the international body's chairmanship this year, is hosting Wednesday to discuss the response to the coronavirus outbreak, which has already caused a major contraction in oil demand.
US President Donald Trump and Russian President Vladimir Putin have said they will participate, and analysts have said that the G20 may be the forum in which a compromise could be brokered.
Russian energy minister Alexander Novak was meeting with Rosneft CEO Igor Sechin late Tuesday to discuss output strategy.
Some US shale producers have been pressuring the Trump administration to intervene in the price war, which broke out after Russia earlier this month declined to go along with an OPEC proposal for production cuts to prop up prices.
Saudi Arabia, the de facto leader of OPEC, has since announced it plans to raise its production by about a third and supply a record 12.3 million b/d of crude to the market starting in April. The kingdom has also slashed its official selling prices for crude exports, putting extreme downward pressure on the market.
S&P Global Platts assessed Dated Brent at $24.04/b on Wednesday, after it hit an 18-year low of $22.195/b on Monday.
"The G20 forum could provide a face-saving solution for the two countries," said Olivier Jakob, an analyst with consultancy Petromatrix. "Saudi Arabia has promised a tsunami of crude, but with refinery runs being cut and expensive freight, it will have increased difficulties to find buyers for its crude. A G20 agreement could provide a good excuse to redefine the supply strategy."
The price plunge has forced almost all oil companies to slash their budgets, and analysts have warned of a wave of bankruptcies in the US shale patch.
Trump, who has been generally supportive of lower prices given the US' status as the largest consumer of gasoline, said last week that he would intervene "at the appropriate time."