Russian President Vladimir Putin attends a meeting with public members in Sevastopol, Crimea March 18, 2020. Sputnik/Alexei…
FILE - Russian President Vladimir Putin attends a meeting with members of the public in Sevastopol, Crimea, March 18, 2020.

WASHINGTON / MOSCOW - Russian President Vladimir Putin called on Wednesday for global oil producers and consumers to address "challenging" oil markets, while U.S. President Donald Trump complained that oil cheaper "than water" was hurting the industry.

Oil prices fell nearly 70% from January highs as coronavirus lockdowns 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.

Oil and natural gas sales are a key revenue source for Russian coffers, while low prices are also hurting shale oil producers in the United States.  

Speaking at a government meeting, set up via a video link as a precaution against the coronavirus, Putin said that both oil producers and consumers should find a solution that would improve the "challenging" situation of global oil markets.

He also said if investments into the oil sector fell, oil prices would be sure to spike, something he said "no one needs."

"That's why we, together with the main producers and consumers, should work out such decisions, which would mitigate the situation on the market on the whole," Putin said, according to the readout of the meeting.

FILE - U.S. Secretary of Energy Dan Brouillette gestures during an interview at the LNG terminal of the deepwater port of Sines after visiting the port, in Sines, southern Portugal, Feb. 12, 2020.

Flurry of diplomacy

On Tuesday, U.S. 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 Putin agreed in a phone conversation to have their top energy officials discuss global oil market turmoil.

Putin said that the United States was also worried about the state of the oil market as shale oil producers need a price around $40 per barrel to turn a profit.

"That's why this is also a hard challenge for the American economy," he said.

Trump plans to meet with oil executives on Friday to discuss potential aid to the industry, including possible tariffs on oil imports from Saudi Arabia, The Wall Street Journal reported, citing unidentified sources.

The meeting is to take place at the White House and will include Exxon Mobil Corp., Chevron Corp. and Occidental Petroleum Corp., the newspaper said in a report on Wednesday.

Crude oil benchmarks ended a volatile quarter with their biggest losses in history. On Wednesday, oil slid toward $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.

Pact's collapse

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 on 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.

FILE - Russian Energy Minister Alexander Novak is pictured at EU Commission headquarters in Brussels, Oct. 29, 2014.

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 dialogue among major energy producers and consumers, including through the G-20, 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 United States 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 U.S. shale industry.

'Crazy' production

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 that 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.