The White House faces a difficult but not impossible task as it seeks to convince Saudi Arabia not to unleash a flood of oil into the already oversaturated market.
Why it matters: The COVID-19 pandemic is crushing global oil demand. The economic hit to the oil industry — already underway in the U.S. — will be even tougher to emerge from if the Saudis proceed to boost supply to over 12 million barrels per day next month.
Driving the news: Trump officials are boosting diplomatic efforts around supply management following the collapse of the Saudi-Russia output limiting deal, which steepened ongoing price declines.
- They're emphasizing the Saudi's new role as the rotating leader of the G20 as a leverage point, per administration officials and this Wall Street Journal piece.
What they're saying: Look at how the State Department wrote its summary of Secretary Mike Pompeo's call this week with Saudi Crown Prince Mohammed bin Salman.
- It says Pompeo stressed that as the G20 head and "an important energy leader," the Saudis have a "real opportunity to rise to the occasion" and "reassure global energy and financial markets" amid global economic uncertainty.
- And a senior administration official tells me: "We believe that Saudi Arabia cares deeply about the stability of the global oil market and we are in close communication with the Kingdom about policies that can improve conditions for economic growth."
What we're watching: President Trump will take part in a G20 videoconference this morning on COVID-19 response, so we'll be watching for signs of whether oil policy came up.
The big question: Will U.S. efforts sway the Saudi's posture in their price war with Russia?
- "The Saudis see the G20 presidency as a coming-out party that finally enshrines the kingdom as a global powerbroker," Rice University energy and geopolitics expert Jim Krane tells me.
The intrigue: Krane notes that while Trump officials are appealing to their sense of responsibility that comes with the role, the administration is an imperfect messenger.
- "The problem is, the Trump administration's 'America First' agenda explicitly rejects the role Trump is now asking the Saudis to play."
But, but, but: There's still an opening. Oil analyst Ellen Wald says the Trump administration has some leverage in its effort to push for restraint.
- "If it's a top priority for the president, he has to let the Saudis know that not cutting oil production will weaken the U.S.-Saudi relationship, because the relationship is what the Saudis value most," says Wald, a Saudi expert.
- The Saudis have motivations to consider the price war's effect on the U.S. and the broader financial system, she adds.
- Via Twitter, Wald pointed out that the Saudi crown prince has an interest in the state of U.S. and global business, citing investments by the Saudi's huge sovereign wealth fund in companies based in the U.S. and elsewhere.
Go deeper: U.S. pressures Saudi Arabia to give up oil price war with Russia (S&P Global Platts)