Crude oil futures rise sharply as end to price war looks promising

Singapore — Crude oil futures surged on Thursday after US President Donald Trump said he expected Saudi Arabia and Russia to reach a deal soon to end their oil price war and Russian President Vladimir Putin called for a solution to “challenging” oil markets.

Brent crude futures rose 5.9%, or $1.46, to $26.20 as of 4.18am GMT, while US West Texas Intermediate (WTI) crude futures were up 4.6% or 94c, at $21.25.

Trump said he had talked recently with the leaders of both Russia and Saudi Arabia and believed the two countries would make a deal to end their price war within a “few days” — lowering production and bringing prices back up.

Trump also said he has invited US oil executives to the White House to discuss ways to help the industry “ravaged” by slumping energy demand during the coronavirus outbreak and a price war between Saudi Arabia and Russia.

“I’m going to meet oil producers on Friday. I’m going to meet independent oil producers also on Friday or Saturday. Maybe Sunday. We’re going to have a lot of meetings on it,” Trump told reporters at a media conference.

He also said he would be meeting with oil executives, where he is expected to discuss a range of options to help the industry amid the sharp hit to demand as the coronavirus outbreak has hammered industrial activity and kept cars off the road.

Speaking at a government meeting on Wednesday, Putin said that both oil producers and consumers should find a solution that would improve the “challenging” situation of global oil markets.

Some analysts cautioned there is still a long way to go before any output cut agreement is struck.

With markets facing 15-million barrels a day of oversupply in the second quarter and storage maxing out in April, extraordinary curtailments of oil supply will be needed in May and June, said Kang Wu, head of Asia analytics at S&P Global Platts.

Brent prices need to drop to low-$10 a barrel to force immediate supply curtailment, he added, forecasting global oil demand to decline about 4.5-million barrels a day this year.

Research firm Rystad Energy estimates global crude oil demand in April will fall nearly 23% year-on-year to 77.6-million barrels a day.

Saudi Arabia’s crude supply rose on Wednesday to a record of more than 12-million barrels a day, two industry sources said, despite a plunge in demand and US pressure to stop flooding the market.

“This is a clear sign that the Saudis are not ready to back off in the price war, despite the Russians now saying that they will not increase output given the current oversupply in the market,” ING said in a research note on Thursday.

“Saudi Arabia has always welcomed and supported co-operation among oil producers in their efforts to stabilise the oil market during the current crisis based on the principles of fairness and equity,” a senior Gulf source familiar with Saudi thinking told Reuters on Thursday.

US crude stockpiles rose 13.8-million barrels in their biggest weekly increase since 2016 and analysts expected stocks to keep rising as refineries curb output and gasoline demand falls.

“At the current price, many US oil exploring energy companies won’t be able to make a profit and drilling activities might fall in North America,” CMC Markets analyst Margaret Yang said.

US shale producer Whiting Petroleum, once the largest oil producer in North Dakota, on Wednesday became the first publicly traded casualty of the oil price collapse as it filed for Chapter 11 bankruptcy.

• with Sonali Paul

Reuters

Source: businesslive.co.za