US and Russian energy officials held rare talks about oil after crude prices crashed to levels last seen about two decades ago, while President Donald Trump said oil that was cheaper “than water” was hurting the industry.

Oil prices fell nearly 70 percent from January highs as lockdowns due to the coronavirus hammered demand and as Saudi Arabia and Russia have flooded the market in a race for market share after a deal they engineered on supply curbs broke down.

US Energy Secretary Dan Brouillette spoke with his Russian counterpart Alexander Novak about the price slump and they agreed to hold future discussions involving other major world oil producers and consumers.

The call occurred a day after Trump and Russian President Vladimir Putin agreed in a phone conversation to have their top energy officials discuss global oil market turmoil.

Trump said on Tuesday he would join Saudi Arabia and Russia, if need be, for talks about the fall in oil prices, which at current levels will squeeze out higher cost production, particularly US shale output which surged in recent years.

Crude oil benchmarks ended a volatile quarter with their biggest losses in history. On Wednesday, oil slid towards $25 a barrel, after touching its lowest level in 18 years.

“There is so much oil and in some cases it’s probably less valuable than water. At some points of the world the water is much more valuable. So, we’ve never seen anything like it,” Trump said.

Oil diplomacy

The discussions between Washington and Moscow mark a new twist in oil diplomacy since the collapse this month of a deal between the Organization of the Petroleum Exporting Countries and other producers, including Russia, on cutting production.

The failure to agree an extension to a pact that had propped up the market since 2016, led to the scrapping of all restrictions and a dash for market share.

Brouillette and Novak “had a productive discussion on the current volatility in global oil markets,” Energy Department spokeswoman Shaylyn Hynes said.

“Secretary Brouillette and Minister Novak discussed energy market developments and agreed to continue dialog among major energy producers and consumers, including through the G20, to address this unprecedented period of disruption in the world economy,” she said.

The Russian Energy Ministry said on Wednesday the ministers “noted” that the fall in the demand and oversupply created risks for stable supplies to the markets.

The US has grown in recent years into the world’s largest oil and gas producer, thanks to a technology-driven shale drilling boom. But the current price of oil is below the production cost of many American drillers, threatening the highly leveraged US shale industry.

Trump on Monday said Saudi Arabia and Russia “both went crazy” with their production after the supply deal failed. “I never thought I’d be saying that maybe we have to have an oil (price) increase, because we do,” he said.

The Trump administration is trying to persuade Saudi Arabia, the world’s top oil exporter, to cut crude output. It will soon send a special energy envoy, Victoria Coates, to the kingdom.

The Kremlin said on Wednesday that Russia and Saudi Arabia were not holding talks regarding the oil market at the moment and Russian President Vladimir Putin had no immediate plans to have a phone call with Saudi leadership.

But the Kremlin added that such talks could be set up quickly if necessary.

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Last Update: Wednesday, 01 April 2020 KSA 15:10 - GMT 12:10