President TrumpDonald TrumpTexas announces election audit in four counties after Trump demand Schumer sets Monday showdown on debt ceiling-government funding bill Pennsylvania AG sues to block GOP subpoenas in election probe MORE said Friday the U.S. would reduce its oil production to move forward with a tentative deal limiting global output, part of an effort by the administration to address sinking prices affecting American oil producers.
An agreement outlined during a Thursday meeting of the Organization of the Petroleum Exporting Countries and other oil-producing nations known as OPEC+ would cut production by 10 million barrels a day, a 10 percent drop in oil production.
But that deal was stalled by Mexico, where President Andrés Manuel López Obrador has been hesitant to cut production levels following campaign promises to boost Mexico’s oil industry.
“The United States will help Mexico along, and they'll reimburse us sometime at a later date when they're prepared to do so,” Trump said, recapping a conversation with López Obrador.
Trump said the U.S. would cut production levels by 250,000 to 300,000 in order to assist Mexico in meeting the parameters outlined by OPEC+, but he could not provide any details as to how Mexico would reimburse the U.S. for cutting production.
“There's no real cost because you’re saving it for another day,” Trump added when pressed for more details.
How Trump will force the domestic oil production cut is also unclear.
U.S. antitrust law prohibits oil companies from coordinating their production, and there is no direct mechanism for the government to dictate production levels to private oil companies.
“U.S. production has already been cut because we're a market driven economy and oil is very market driven. They've been cutting oil all over the place,” Trump said.
The deal Trump is trying to shepherd across the finish line would stall a trade dispute between Saudi Arabia and Russia, with both counties increasing production as the coronavirus pushed demand for oil to drop by 30 percent.
Trump has had conversations with both leaders, including a call to Russian President Vladimir PutinVladimir Vladimirovich PutinNavalny knocks Apple, Google for removing voting app Federal agencies warn companies to be on guard against prolific ransomware strain Top US general: Meeting with Russian counterpart 'productive' MORE on Friday morning.
U.S. production has already fallen amid sinking oil prices.
The number of rigs used to drill new oil wells is down by more than 400 from the same time last year, with nearly half of that decline coming in the last month.
The U.S. Energy Information Administration, part of the Energy Department, predicts domestic oil production will drop by 500,000 barrels per day through the rest of the year, a figure that could decrease by 700,000 barrels per day into next year. The U.S. typically produces about 12 million barrels of oil each day.
The administration's main method for alleviating oversupply issues has been an effort to fill the nation’s Strategic Petroleum Reserve with 77 million barrels of U.S. crude, but the $3 billion in funding needed to do so was not included in a stimulus package approved by Congress.
“For our part, the United States is taking action to open our Strategic Petroleum Reserve to store as much oil as possible. This will take surplus oil off the market at a time when commercial storage is filling up and the market is oversupplied,” Energy Secretary Dan Bouillette said Friday at a virtual meeting of the Group of 20 energy ministers, which is discussing a deal to reduce global oil production by an additional 5 million barrels per day.
Trump said Friday that record low prices have had some benefits, with drivers able to fill tanks in some parts of the country at price points not seen in decades.
“So there's some good,” he said. “The airlines are trying to come back; having low fuel costs is good for them.”