President Trump said he wants to avoid oil-industry layoffs.
Photo: Doug Mills/Bloomberg NewsA virtual summit of Group of 20 energy ministers failed on Friday to devise a detailed plan to help resolve an unprecedented oil glut partly triggered by the coronavirus pandemic.
Some producers continue to pin their hopes on President Trump, who has emerged in recent weeks as a top diplomatic presence in oil-market talks.
The G-20 gathering came a day after an alliance of producers including the Saudi-led Organization of the Petroleum Exporting Countries failed to complete a collective oil truce with Russia and other oil-producing nations.
The majority of countries at that meeting agreed to take part in oil-production cuts to support prices. Mexico refused to join production curbs and had yet to reach a deal with OPEC Friday, putting the broader international agreement in jeopardy.
OPEC had expected Friday’s G-20 meeting to show that the U.S., Canada, the U.K. and other producers not allied with the cartel can pull back 4 million barrels a day of output, according to delegates at Thursday’s meeting. OPEC and its allies including Russia are trying to complete a deal that would have them cut 10 million barrels a day.
But the meeting ended with a press release that didn’t mention specific targets for oil-output reductions. “We recognize the commitment of some producers to stabilize energy markets,” said the press release. “We acknowledge the importance of international cooperation in ensuring the resilience of energy systems.”
Energy Secretary Dan Brouillette, who represented Mr. Trump at the G-20 meeting, told attendees Friday that U.S. production would fall by nearly 2 million barrels a day by the year’s end. And Norway and Brazil said they were either cutting production or planned to do so, according to people familiar with the deliberations. And the G-20 officials agreed to set up a special committee to monitor oil markets, according to the press release.
Mr. Brouillette has been the Trump administration’s point man in its efforts to help resolve a month-long oil-price war between Saudi Arabia and Russia. Behind the scenes, Mr. Trump has been making frequent late-night phone calls to Russian President Vladimir Putin, King Salman of Saudi Arabia and other key players in the oil market.
The role of oil-world peacemaker is an unlikely one for Mr. Trump. Although he is leader of the world’s biggest oil-producing—and oil-consuming—nation, he has been a longstanding critic of cartel-based efforts to boost prices.
“We leave it to Trump to sort it out,” said a delegate who attended Thursday’s failed producers’ call. “He is the best OPEC negotiator today.”
On Friday, Mexican President Andrés Manuel López Obrador said a phone call with Mr. Trump convinced him to cut output. Hours of talks with OPEC the previous day had failed to bring him on board.
Mexican President Andrés Manuel López Obrador said a phone call with Mr. Trump convinced him to cut output.
Photo: jose mendez/ShutterstockMr. López Obrador said Mr. Trump had promised him the U.S. would cover two-thirds of the production curbs the cartel had demanded of Mexico. The U.S. president later confirmed he had “agreed to pick up some of the slack.”
As of late Friday, OPEC-country officials said the cartel had reached no deal with Mexico.
The Trump administration has said market conditions will force U.S. producers to reduce output as they adjust to the coronavirus’s erosion of oil demand and has refused to formally join OPEC’s effort.
Before speaking to the Mexican president, Mr. Trump said he had talked to Mr. Putin and King Salman on Thursday about oil production, adding that he wanted to avoid layoffs in the oil industry both in the U.S. and abroad.
‘Everyone is going to have to reduce production as long as we have this demand curve being what it is,’ U.S. Energy Secretary Dan Brouillette said.
Photo: Drew Angerer/Getty ImagesIn a presentation to the G-20 seen by The Wall Street Journal, OPEC Secretary-General Mohammed Barkindo said global demand is expected to collapse this month by 20 million barrels a day and commercial oil stocks in industrialized nations were set to reach their limit sometime this quarter if no action is taken.
There is confusion about whether such reductions could be coordinated or whether they can simply reflect shutdowns that result from deteriorating demand. But the unprecedented scale of the oil crash has effectively put the Trump administration in a seat normally occupied by OPEC: a global attempt to mend a broken oil market.
For decades, Mr. Trump has been a vociferous opponent of the cartel, deeming its efforts an evil force that squeezed American motorists. But the price war between Saudi Arabia and Russia threatened a vibrant U.S. oil industry and led to what seemed to be a change of heart.
“I hated OPEC. You want to know the truth? I hated it, because it was a fix,” the president said Wednesday. “But somewhere along the line that broke down and it went the opposite way. And we have a tremendously powerful energy industry in this country now…and I don’t want those jobs being lost.”
Yet, on behalf of Mr. Trump, Mr. Brouillette has lobbied producers to turn the G-20 into an arena for oil talks during the crisis, according to people familiar with the matter. Both forums are currently led by Saudi Arabia.
In the past, Washington has mostly sought the help of Saudi rulers when it needed to respond to supply shocks and frowned upon talks with Russia. But last month, the oil-market dialogue broke down between Moscow and Riyadh, prompting a price war between them.
Senior State Department officials realized the president needed to call Mr. Putin, according to people familiar with the matter. That prompted Mr. Trump to contact the Russian leader on March 31—the first time the two men had held talks to mend the oil market.
Moscow is now warming up to the idea of using the G-20 and not just OPEC as a vehicle for oil talks. It was Russian Energy Minister Alexander Novak who proposed creating a monitoring committee within the group. Moscow intends to use the mechanism as a way to ensure voluntary cuts don’t benefit U.S. shale producers, according to people familiar with the matter.
Other than reducing supplies, the G-20 has also been looking at another solution: Countries could buy millions of barrels of crude and store them in national reserves to stimulate demand and put a floor on prices. The mechanism could bail out embattled oil companies, according to people familiar with the matter.
The International Energy Agency—a group representing top oil consumer countries—is backing a push to coordinate such purchases with the U.S. and other industrialized nations to assess crude purchase to fill up strategic inventories, these people said.
—Anthony Harrup, Georgi Kantchev and Gordon Lubold contributed to this article.
Write to Summer Said at summer.said@wsj.com, Benoit Faucon at benoit.faucon@wsj.com and Timothy Puko at tim.puko@wsj.com
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