US expects Opec+ to carry production cuts: Update

Updates with comments from the US oil industry.

The US administration is encouraging Opec+ members to announce production cuts at their emergency meeting later this week but says it will make no pledges on behalf of US producers.

The Opec+ meeting will "hopefully end this misunderstanding that started two or three weeks ago in the last meeting," US energy secretary Dan Brouillette said in a televised interview today. The US is not directly taking part in the Opec+ discussions — "in the US we have a free market and the industry will adjust on its own," Brouillette said.

The falling US oil [rig count](https://direct.argusmedia.com/newsandanalysis/article/2093581) is an indication that US producers already are responding to falling demand in the wake of government-imposed travel restrictions aiming to prevent the spread of the coronavirus pandemic, he said. "That is a usual and customary adjustment to a demand curb."

Industry group American Petroleum Institute today backed the administration's approach.

"We have over 9,000 producers in this country and we live in a situation where one president or one leader cannot say, ‘stop producing American oil,'" the group's president, Mike Sommers, said.

US producers already have responded to the unprecedented drop in demand, Sommers said, highlighting a recent IEA estimate of 20-35pc cuts across the US industry from previously planned 2020 drilling budgets.

US oil producers have done their part to lower the supply of crude by cutting spending and pulling back operations, so other global producers now need to do their part, independent producer Continental Resources' executive chairman Harold Hamm said today.

Brouillette echoed President Donald Trump's threat to impose tariffs on US imports of oil from Opec+ countries that raise output at a time of falling demand. "For those who would take a predatory approach to the US market, the president will react accordingly," including through tariffs, Brouillette said.

The US expects Saudi Arabia and Russia at the Opec+ meeting on 9 April to reverse their decision to raise production levels. Brouillette said he asked his Saudi counterparts to convene an emergency meeting of energy ministers of the G20 group of major economies "towards the end of the week" — Riyadh is chairing the forum this year. The US administration hopes that the Opec+ summit and a subsequent G20 energy ministerial will resolve the differences on production cuts.
The administration, meanwhile, is looking for ways to bolster US oil producers. Trump told oil executives during a White House meeting on 3 April he wants to find new "very big" locations to stash surplus crude as a way to keep oil workers employed.

Brouillette said that the administration was looking for "additional storage capacity around the country, be it commercial or government, available" to hold crude — beyond the 77mn bl of spare storage capacity in the US Strategic Petroleum Reserve (SPR). The SPR has a design capacity of 713.5mn bl, but Brouillette noted that the capacity of the reserve could be increased to 1bn bl under existing law.

"We are going to continue that conversation on the Hill and pursue this opportunity because it is just a great opportunity for the taxpayer right at the moment," Brouillette said.

Congressional Democrats last month balked at allocating $3bn for the Energy Department to buy 77mn bl of oil, leading the agency to offer to lease the available space in the SPR to oil producers struggling to find storage for crude.

By Haik Gugarats