US Mulls Sanctions to Firm up Oil Prices: Press
The US plans to coerce Russia and Saudi Arabia into cutting output to firm up oil prices and protect the US shale industry, the Wall Street Journal (WSJ) reported late on March 19 citing sources.
Russia and Saudi Arabia ended more than three years of co-ordinated supply restrictions earlier this month after the former refused to deepen cuts in response to the Covid-19 crisis. Riyadh responded by slashing its prices and promising to flood the market, causing benchmarks to crash.
The Trump administration is considering weighing into the dispute between the two producers, the WSJ cited officials as saying, as many US shale producers struggle to cover their costs amid such low prices. Washington's intervention could involve a "diplomatic push" to get Saudi Arabia to slash production, as well as the threat of further sanctions against Russia.
The US began imposing sanctions against Russia's oil industry in 2014, to punish Moscow for its annexation of Crimea. Existing sanctions prohibit US companies from working at Russian offshore Arctic, deepwater and unconventional oil projects, while limiting the access of some Russian producers to international financing. Recently Washington has also targeted subsidiaries of Rosneft that have been buying Venezuelan oil, providing a lifeline to the Maduro regime.
President Donald Trump said on March 20 he was "a little torn" on how to address the dispute between Russia and Saudi Arabia, but that he would intervene at the "appropriate time." He noted that low gasoline prices were good news for US consumers, even if shale drillers are hurting. Russia could suffer the most if current oil prices persist, he said.
"We have a lot of power over the situation. We’re trying to find some kind of medium ground," he said. "It’s very devastating to Russia because when you look, their whole economy is based on that." Brent rallied 7.7% on March 20 to $30.31, after falling steadily over the previous week, following heavy government and central bank stimuli around the world.