Middle East Eye

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US presses Saudis on oil deal as talks reach third day: Reports

The US stepped up pressure on Saudi Arabia to seal a historic deal to cut oil production as negotiations that President Donald Trump has brokered dragged on for a third day.

Talks aimed at ending a price war continued on Saturday as Mexico and Saudi Arabia refused to budge, Bloomberg reported.

The survival of thousands of oil producers, millions of jobs and the economies of oil-dependent nations hang in the balance as the global coronavirus pandemic wipes out demand in a world awash with crude. Several US shale producers are on the brink of bankruptcy, Russia risks having no place to store its crude, and for all their low-cost production, the Saudis need higher prices to fund their budget.

Analysts expect oil prices, which soared above $100 a barrel only six years ago, to remain below $40 for the foreseeable future. On Thursday, the last day that oil futures traded, the price fell sharply even though the producers were close to a deal. The American oil benchmark price was just under $23 a barrel, the New York Times reported.

An unprecedented reduction of about 10 percent in worldwide crude output had looked all but certain, and Russia said it considered the deal done. But Mexico balked at the terms and talks with Saudi Arabia have since failed. Trump announced a potential compromise on Friday, but his diplomatic solution still hasn’t been accepted by all sides.

Opec+, the group and its and allies including Russia, has made a commitment to cut a record 10 million barrels a day, conditional on Mexico’s agreement. Most Opec+ countries back the Trump compromise, according to delegates, but Saudi Arabia and Mexico continue to negotiate bilaterally, according to Bloomberg.

Some Republican senators have raised the prospect of cutting off aid to Saudi Arabia if the kingdom doesn’t pare its output and end the price war it started last month even as the coronavirus pandemic had already crushed demand for oil.

In an attempt to move negotiations along, a group of Republican senators from oil-drilling states including Texas spoke to the Saudi oil minister by conference call.

The push by Republican senators was a sign of how Congress could raise pressure on Saudi Arabia if it does not stick to the oil cut plan. If the kingdom does not cut, pointed measures may be included later this year in must-pass legislation such as the annual defence policy bill, Reuters said.

“The Saudis spent over a month waging war on American oil producers, all while our troops protected theirs. That’s not how friends treat friends,” said Senator Kevin Cramer of North Dakota. “Saudi Arabia’s next steps will determine whether our strategic partnership is salvageable.”

With Trump now personally involved, the stakes appear too high for the deal to fail. But even the US president acknowledged on Friday that he wasn’t certain if an agreement could be reached.

Saudi Arabia plans to announce its crude prices for May on Sunday, a source told Reuters, having delayed the official release until after it finalises the global oil supply cut deal. Source