President Trump and two Texas oil producers are launching new efforts to temper the stunning supply-demand imbalance and price collapse that's inflicting deep financial wounds in the U.S. industry, Axios' Amy Harder and I report.
Driving the news: Amy reports that shale producers Pioneer Natural Resources and Parsley Energy have formally asked Texas regulators to take the extraordinary step of imposing mandatory production curbs to help steady the ship.
- A hearing is expected soon on their request, but the industry is divided over the concept (more on that below).
Separately, Trump talked about oil markets yesterday with Russian President Vladimir Putin, whose country is battling Saudi Arabia for market share after their supply management pact collapsed weeks ago.
- The White House said they "agreed on the importance of stability in global energy markets."
- The latest moves come days after the White House and State Department signaled that they're trying to put more pressure on the Saudis too.
But, but, but: Prices regained some ground on word of the Trump-Putin talks, Reuters notes. But don't expect a magic fix.
- It's hard to see changes that could substantially boost prices getting hammered by COVID-19, or quickly ease logistical problems as storage fills up.
- Restrictions from the pandemic are causing an unprecedented demand decline that analysts see reaching 20 million barrels per day or more in the near term.
What they're saying: Despite the flurry of activity, the prospects for diplomatic or U.S. policy changes that significantly staunch the financial bleeding are quite limited, especially as the Saudis press ahead with supply increases.
Plus, even relatively modest policy options face hurdles. One example is the new U.S. stabilization package, which cut proposed funding to buy 77 million barrels of oil for the Strategic Petroleum Reserve.
- "It’s really just such a demand shock that very little that can be done on the supply side is going to be able to have an impact," Sarah Ladislaw of the Center for Strategic and International Studies said on a new episode of the Platts Capitol Crude podcast.
- And when it comes to Russia, a note from ClearView Energy Partners says getting Russia to back off in its fight with the Saudis is no easy thing.
- "This pro-stability, bilateral engagement may seem more auspicious than apparent silence from Saudi Arabia, but ministerial-level discussion and presidential-level decisions are very different things," they note.
The big picture: Via International Oil Daily, Chris Weafer, CEO of Moscow-based Macro-Advisory, said that Trump's call to Putin "shows how badly the price crash is hitting U.S. shale producers."
- But Weafer added there are some prospects for cooperation.
- "Whatever the public bravado, all three countries need a higher oil price. Now that the US has indicated it is willing to take part, there is at least a better chance for a solution to emerge, although not too quickly," he told IOD.