Daily Management Review

US Envoy To Work With Saudi Arabia As Oil Price Slump Hit American Oil Producers


US Envoy To Work With Saudi Arabia As Oil Price Slump Hit American Oil Producers
A special energy representative from representing the administration of United States President Donald Trump is will be sent to Saudi Arabia, according to officials. There has been a crash in the global oil price which has got the White House to seek ways to respond to it. In a rare measure, regulator of one of the most important oil-producing state in the US is now considering reducing production in an effort to stabilize the oil price.
Over the last two week, the global price of oil has almost halved after a price war started following the break down in the partnership between Saudi Arabia led OPEC and Russia as well as reduction of global demand because of the coronavirus pandemic.
The break down in the negotiations for a deeper production cut broke down between the OPEC and non-OPEC producers which resulted in the crash in the global oil prices as all producers are now free to take out as much of oil as they want.
Amidst such an environment, regulators in Texas are contemplating the otherwise unusual measure of intervening to reduce output which will be a first in decades. The situation has also forced the US to negotiate with Saudi Arabia which is currently ramping up oil production in years since it played a major role as a a stabilising force for markets.
Earlier this month, an agreement for production cuts for than last three years broke down and Saudi Arabia and Russia have since engaged in a battle for market share of the global oil market. Saudi Arabia has announced its plans of ramping up production to a record 12.3 million barrels per day and has already chartered numerous tankers for transportation of oil to various parts of the world. That has pushed oil prices to near 20-year lows this week.
According to the US, at a time when the oil demand is already low because of the coronavirus pandemic, the move by Saudi Arabia of increasing supply of oil in the market will only add on to the global economic crash.
According to the Reuters News Agency, the Trump administration is sending a senior official from the US Energy Department to Riyadh who would be working closely with Saudi Arabian authorities for months while also coordinating with the Department of State officials and the existing energy attaché.
For decades, Saudi Arabia has led the mission for providing stability to the global oil market, officials of the Trump administration said. the US official said that the mandate for the envoy of the Trump administration is to help the countries get bank to the strategy of stabilizing the global oil prices.
US oil producers are being hit by the price crash and some producers have already sent some employees on leave.
Ryan Sitton, a commissioner with the Texas Railroad Commission, the body that regulates the state's oil and gas industry said that the US oil producers now hope that a pact could be reached between the Trump administration and Saudi Arabia and Russia in a manner that all of the parties agree to match cuts with a similar cut in production in Texas.