In an attempt to support the US market in the midst of the COVID-19 pandemic, Donald Trump has announced a possibility of stopping all crude oil imports from Saudi Arabia.
40m barrels of oil, en route to America, could be blocked from entering the US waters. Currently, the US storage facilities are chock-full with unwanted crude oil.
The Trump administration has raised concerns over the total amount of oil the tankers are carrying, as it is seven times the usual Saudi export to the US. It is believed that the “oil dumping” will further aggravate the negative oil prices, which the US has seen for the first time in history earlier this week. On the global scale, oil prices have reached 21-year lows.
US senator Ted Cruz posted an unapologetic post on Twitter on Tuesday: “My message to the Saudis: TURN THE TANKERS THE HELL AROUND.”
Such radical warning was fueled by the result of a desperate market. With the roaring consequences of the coronavirus pandemic, the demand for oil keeps falling while the production and supply aren’t slowing down. US traders were paying to get clear of the oil as the storage space was getting more saturated by the minute. The devastating collapse in prices threatens to bankrupt the entire US oil industry.
Saudi Arabia may need to find an alternative route to European and Asian oil storage facilities, and if so, the kingdom needs to act fast. It is estimated that the biggest oil storage facility in the US can run out of space within the next three weeks. The global storage facilities, however, might be full by the end of May.
US officials have spoken openly about their plans to either implement steep import tariffs on crude oil, or a complete block on incoming oil. Should these measures take place, government funds will be used to buy domestic crude oil to support the industry.
Many blame the President for downplaying the crisis and its impact on the industry. Trump described the sharp drop as a short-term phenomenon, prompted by the lack of demand due to the enforced lockdowns in many states.
By denying access to its oil storage facilities and maintaining the already strained relationships between Washington and Riyadh, US is likely to be seen as an insatiable aggressor. In March this year, US senators called on Saudi Arabia to leave OPEC, and threatened to withdraw US military forces stationed in the Kingdom.