Oil prices rallied on Thursday after President Donald Trump talked up the possibility of Saudi Arabia and Russia ending a squabble that contributed to crude’s massive plunge since last month.
West Texas Intermediate futures surged by $2.11, or 10.4%, to $22.42 per barrel. International benchmark Brent jumped 10.4%, or $2.58, to $27.32 per barrel.
“Worldwide, the oil industry has been ravaged,” Trump told reporters in a news conference Wednesday evening. “It’s very bad for Russia, it’s very bad for Saudi Arabia. I mean, it’s very bad for both. I think they’re going to make a deal.”
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Trump added he expects both countries to end their price war within a “few days.” Trump made his remarks ahead of a meeting with energy industry executives scheduled for Friday.
“Who has the biggest problem? Saudi, and Russia. Saudi above all,” Paul Sankey, an analyst at Mizuho, said in a note to clients. “Their burn rate in this market will use up their $500bn reserve pile within two years.”
OPEC countries led by Saudi Arabia proposed last month a production cut of 1.5 million barrels per day as demand waned. However, non-OPEC producer Russia rejected the cut, sparking a price war between the two nations that has tanked the value of crude.
On March 6, U.S. crude was trading above $41 per barrel. Since then, crude has lost about half of its value.
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“Saudi Arabia is fulfilling its pledge of raising oil exports following the collapse of the OPEC+ agreement with Russia,” said Neil Beveridge of AB Bernstein, in a note. “We expect unprecedented levels of stock builds in 2Q20 which could test the limits of both onshore and floating crude capacity.”
Crude also got a boost Thursday after Bloomberg News reported —citing people with knowledge of the matter — that China will start buying oil for its emergency reserves.
Source: cnbc.com | Original Link