Dozens of US oil firms are facing the risk of bankruptcy when oil prices fall freely, prompting officials to seek rescue.

WSJ quoted a source familiar that US officials are seeking diplomatic plans to persuade Saudi Arabia to reduce oil production and threaten to punish Russia after US oil companies pressured the government to intervene. Many businesses and these industry organizations have recently met with White House officials, the US Department of Finance and Commerce to ask for help. The most raised requests are diplomatic intervention and reserve purchases, the WSJ source said.

Oil executives also asked Texas officials to help, by refraining from producing for the first time since the 1970s. Texas is a famous state of shale oil production in the United States.

“We expect President Donald Trump’s administration to use negotiation tools with the Saudis and Russians,” said Pioneer Natural Resources CEO Scott Sheffield, “I try to prevent the oil industry from disappearing in the next 18 months”.

Sheffield says he wants the US to reduce production by 500,000 barrels a day until the end of the year. Each company only needs to reduce about 10% of output. Small businesses are exempted.

Crude oil prices have recently fallen sharply due to both supply and demand pressure. Fuel demand is down due to countries blocking borders and economic activity has gone down during a pandemic. Meanwhile, the oversupply will increase sharply because Russia and Saudi Arabia increase production to gain market share. US crude oil WTI on March 18 has the strongest decline in history, to the bottom of 18 years. Although prices recovered to more than $ 26 a barrel, WTI fell 60% in this year.

The administration of US President Donald Trump is considering ways to help the US oil industry. Dozens of oil companies in this country are facing the risk of bankruptcy when the pandemic spread.

WSJ sources said the US intends to ask Saudi Arabia to return to the old level of production, which is lower than it recently announced. The US may agree with Saudi Arabia that they will threaten to punish Russia to ensure Russia does not easily receive benefits from Saudi cuts down. The punishment methods are being discussed.

Although it is unclear when US officials will intervene, the information also points to a turning point in US fuel policy. Shale oil companies helped the United States become the largest oil producer in the world, with 13 million barrels a day. But now, they are under great pressure.

“The demand has never dropped sharply as now since the world enters a modern era,” said Daniel Yergin – IHS Markit Vice President, “This industry is in an emergency situation.” Major oil companies, such as Chevron and Exxon Mobil, have not expressed their support for the above methods yet, WSJ sources said.

Last week, Trump ordered the US Department of Energy who buys additional oil into the Strategic Oil Reserve. Yesterday (March 19), this ministry said that they would start looking to buy 30 million barrels and will continue to buy more to increase reserves to 77 million.

Industry officials and the US government indicated that diplomatic measures are necessary for Russia and Saudi Arabia to make concessions in the battle to engulf the oil market. By the end of this month, the agreement to save oil prices over the past 3 years of two countries will expire. Both earlier failed to extend this deal and they told that they will increase production.

Trump also told on 19 March that he was “a little puzzled” about how to deal with oil prices, as well as with Russia and Saudi Arabia. However, he said that he would intervene in the market “at the right time”. He asserted that consumers are benefiting from low oil prices, though this is hurting businesses. He also hinted that Russia would have suffered if oil prices remained low for a long time because “their entire economy depended on it”.

The US has long imposed punishments on the Russian oil industry. They also blacklisted Russian state-owned oil firm Rosneft because Russia interfere in the problems of Ukraine.

However, like the former administration of President Barack Obama, Trump does not target oil exports of Russia because this problem could escalate diplomatic tensions between the two countries. The United States has also not imposed a large-scale ban on Rosneft, due to consideration of the consequences to companies in the US and the world that are cooperating with Rosneft.