By Jordan Fabian, David Marino and Jennifer A. Dlouhy
Crude oil futures tumbled as much as 7.7% in New York, touching an 18-year low.
The Trump-Putin call came at the request of the U.S. and was “prolonged,” according to the Kremlin, which didn’t specify how long it lasted.
Trump’s view on the the dispute marks a shift from earlier this month, when he likened the plunge in oil prices to a “tax cut” for Americans. The U.S. president spoke to Saudi Crown Prince Mohammed bin Salman on March 9 about the dispute.
Trump has long argued that improving relations between Washington and Moscow could help solve international disputes. The president said he wanted to discuss trade with Putin, though he said he expected the Russian president to raise objections to U.S. sanctions. State-run Tass quoted Kremlin spokesman Dmitry Peskov as saying that Putin didn’t ask Trump for sanctions relief on the call.
Oil tumbled earlier to its lowest point in nearly two decades, heading for the worst quarter on record as coronavirus lockdowns cascaded through the world’s largest economies, leaving the market overwhelmed by cratering demand and a ballooning surplus. The slump in demand has shut refineries from South Africa to Canada.
Goldman Sachs Group Inc. estimates consumption will drop by 26 million barrels a day this week. Meanwhile, Riyadh and Moscow are showing no signs of a detente in their supply battle as Saudi Arabia announced plans to increase its oil exports in the coming months, despite U.S. warnings against flooding the market.
Some analysts argue Russia’s motivations extend well beyond oil and are complicated by the federation’s anger over U.S. sanctions and opposition to the Nord Stream 2 pipeline linking Russia to Germany. And the price for getting Russia to back down could be too high.
“Russia’s concerns with the U.S. go beyond market share. Putin is frustrated with sanctions and may be more interested in punishing the U.S. than Saudi Arabia,” said Dan Eberhart, a Trump donor and chief executive of drilling services company Canary LLC. “If Trump wants an agreement with Putin, he may have to promise to ease up on sanctions. I am not sure he can deliver without the backing of congress.”
Rosneft PJSC over the weekend sold its assets in Venezuela to the Russian government, a move that shields the Russian oil giant from further U.S. sanctions while keeping Moscow behind the regime of Nicolas Maduro. Fears of broader sanctions have grown after the U.S. in recent months slapped restrictions on Rosneft trading companies for handling business with Venezuela.
Talks between members of the Organization of Petroleum Exporting Countries and its allies broke down in early March as Russia refused to sign on to larger production cuts proposed by Saudi Arabia. The failure to reach an agreement prompted the Saudis to unleash a price war which, combined with the devastating effect of the virus pandemic, caused the market to crash.
Global demand is slumping by as much as 20 million barrels a day, about 20%, as billions of people go into lockdown to slow the spread of the virus. The outlook remains dire, with traders, banks and analysts forecasting a huge oversupply as governments effectively shut their economies.
Oil industry leaders, trade groups and some Republican senators have pressed the Trump administration to seek a diplomatic solution with Saudi Arabia. Six senators from oil-producing states last week urged Secretary of State Michael Pompeo to take a tougher stance against Saudi Arabia, while highlighting several “powerful tools at our disposal,” including sanctions, tariffs and other trade restrictions.
“Trump would have better success pressing Saudi Arabia than Russia since they are dependent on the U.S. for protection, intelligence and arms sales,” Eberhart said.
On the coronavirus, the two sides expressed concern about the scale of its spread, according to the Kremlin. The leaders discussed steps they were taking to fight the virus and potential areas of cooperation.