OPEC head talks with Texas regulator in sign of market turmoil
- Ben Geman, author of Axios Generate
OPEC Secretary General Mohammad Barkindo. Photo: AFP Contributor / Getty Images
A member of the commission that oversees Texas' oil production spoke Friday with OPEC Secretary-General Mohammed Barkindo.
Why it matters: The extraordinary chat between Barkindo and the Texas Railroad Commission's Ryan Sitton underscores the unprecedented upheaval in global oil markets and the collapse in prices.
What they're saying: "Great conversation on global supply and demand. We all agree an international deal must get done to ensure economic stability as we recover from COVID-19," Sitton said via Twitter, adding that Barkindo invited him to OPEC's June meeting.
- Via Reuters, Barkindo confirmed the discussion and told the news service he discussed his "perspective on current developments, and the possibility of future cooperation."
The big picture: Travel and economic freezes from COVID-19 are cratering global oil demand, while Saudi Arabia and Russia are waging a price war following the rupture of their output-limiting agreement this month.
- Prices for West Texas Intermediate, the U.S. benchmark, have fallen by two-thirds since early January, and are now at their lowest levels in roughly two decades.
- A suite of U.S. oil companies have announced plans to sharply cut back their spending.
Driving the news: Sitton, in a Bloomberg op-ed Friday morning, floated the idea that the commission could use its power to require a 10% cut in U.S. production — if the Saudis cut theirs by 10% from pre-pandemic levels and Russia does too.
- He said this would stabilize prices in the mid-$30s per barrel (they're around $20 now) and "stave off a total oil industry meltdown."
- His op-ed also notes that the federal government would need to make such a deal.
But, but, but: Wayne Christian, the Texas commission's chairman, threw cold water on the idea of imposing production curbs in a Friday statement.
He noted, among other reservations, that it hasn't happened in more than 40 years and that "we do not have staff at the agency with experience in this process and our IT capabilities to handle this process are limited at best."
What's new: Reuters reported Friday afternoon that the Trump administration "intends to send a senior official to Riyadh to boost efforts to stabilize energy markets."
- Trump on Thursday signaled an interest in trying to somehow intervene in the Saudi-Russia dispute.
- Bloomberg reports there have been "tentative signs" that Russia and the Saudis "may be edging towards an off-ramp from the price war."