Republican senators in the U.S. are putting tremendous pressure to push Saudi Arabia to implement a production cut, aimed at boosting low oil prices.
Stopping the downward spiral of prices
Legislators have been visibly frustrated as crude prices continue to drop, as a result of a price war between Russia and Saudi Arabia. This situation affects U.S. oil producers amid the health crisis caused by the coronavirus.
Numerous oil workers, many of them in Republican states such as Texas, could lose their jobs. Some shale oil producers that are deep in debt will not survive this. More than 16 million U.S. citizens have already filed for unemployment over the past three weeks.
Removing military support
These republican senators, who represent the oil states and recently introduced a legislation to remove U.S. troops from Saudi Arabia, said on Tuesday they had spoken with three Saudi officials and encouraged them to take concrete measures to reduce crude production.
The call was led by senators Dan Sullivan and Kevin Cramer, members of the Senate Armed Services Committee, who introduced a bill to remove U.S. troops, Patriot missiles and THAAD defense systems from Saudi Arabia, unless the kingdom agrees to cut production.
In January, there were around 2,500 U.S. military personnel in Saudi Arabia. In October 2019, Washington deployed around 3,000 soldiers in this area, at a moment of great tension with Iran.
The senators spoke with the Saudi energy minister, prince Abdulaziz bin Salman, and Saudi Arabia’s ambassador to the U.S. princess Reema bint Bandar bin Sultan.
In an interview with CNN, Sullivan said the senators were open to listening to the Saudis. “But at this point actions are going to speak a lot louder than words.”
Last week, when the group of republican senators behind this effort met with President Donald Trump and asked him to side with U.S. oil producers; they told Trump that the oil industry played a significant role in the country’s escape from the 2008-2009 recession.
At one point, Trump said that the lower oil prices are good for common Americans. He explained that he would enter the dispute when he deems it appropriate. Last week, the president made more of an effort to seek a solution to the crisis. He made several calls to his counterparts in Russia and Saudi Arabia.
During the press conference on Thursday, Trump spoke about an imminent agreement between Saudis and the Russians to cut production. And after OPEC members and other oil producers met on Thursday, Russia and Saudi Arabia suspended their brutal price war.
Now, they are pushing dozens of other crude producers to make a deal to recut output and stabilize the market, which was shaken by the coronavirus pandemic.
But there is still not a definitive solution to this problem. Since Mexico refuses to reduce its supply. Trump said on Friday that the U.S. would cut its production by 250,000 bpd. This way, Mexico could only cut oil output by 100,000 bpd. However, it is unclear whether this proposal will succeed.
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