The price of crude oil has crashed to $20 this week, due to a one-two punch of Saudi Arabia flooding the market with record output and a sharp drop in global demand owing to the coronavirus pandemic. Asked about it during a press conference about the pandemic on Thursday, Trump described the price war as “very bad” for Saudi Arabia and “devastating” to Russia, but helpful in a way to American consumers as it will lower gas prices at the pump.
“We have a lot of power over the situation,” Trump added, saying the US might get involved in mediating the dispute “at the appropriate time.”
US oil companies are pushing for diplomatic pressure on Riyadh to cut oil production and threatening Russia with more sanctions in order to force it to accept production cuts, the Wall Street Journal reported on Thursday, citing anonymous sources.
Last week, Russia signaled that it has enough reserves to cover budget deficits for years, even if oil prices stay between $25-30 a barrel. While a $20 price may shorten that somewhat, Moscow was clearly sending a message to Riyadh and Washington that attempts to crash its budget will fail.
It is unclear whether the Saudis can actually cover their own deficits and for how long. Meanwhile, US frackers and shale oil drillers have been taking on debt for years, since their high operating costs require oil to sell above $50 to actually be profitable.