Oil jumps as Trump talks up truce hopes for Saudi-Russia price war(Update 2)
Brent crude futures rose 5.9%, or US$1.46, to $26.20 as of 0418 GMT (1218 Malaysian time), while U.S. West Texas Intermediate (WTI) crude futures were up 4.6% or 94 cents, at $21.25. (File pic shows oil Philips oil storage tanks in Linden, New Jersy, US.)
SINGAPORE: Crude oil futures surged on Thursday after U.S. 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 US$1.46, to $26.20 as of 0418 GMT (1218 Malaysian time), while U.S. West Texas Intermediate (WTI) crude futures were up 4.6% or 94 cents, 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.
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 per day (bpd) 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 per barrel to force immediate supply curtailment, he added, forecasting global oil demand to decline around 4.5 million bpd this year.
Research firm Rystad Energy estimates global crude oil demand in April will fall nearly 23% year-on-year to 77.6 million bpd.
Saudi Arabia's crude supply rose on Wednesday to a record of more than 12 million barrels per day, two industry sources said, despite a plunge in demand and U.S. pressure on the kingdom 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.
U.S. 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 U.S. 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.
U.S. shale producer Whiting Petroleum Corp , 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. - Reuters
Earlier report:
Oil price ends lower after US crude stockpiles jump, gasoline demand sinks
NEW YORK: Oil prices fell on Wednesday after U.S. crude inventories rose last week by the most since 2016, while gasoline demand suffered its biggest weekly drop ever due to the coronavirus pandemic.
Crude inventories rose by 13.8 million barrels last week, the U.S. Energy Information Administration said. That was the biggest one-week rise since 2016, and analysts expect similar data in coming weeks, as refineries curb output further and gasoline demand continues to decline.
West Texas Intermediate (WTI) crude fell 17 cents to settle at $20.31 a barrel, after hitting a low at $19.90.
June Brent crude fell $1.61, or 6.1%, to $24.74 a barrel. The global benchmark fell to $21.65 on Monday, its lowest since 2002, when the now-expired May contract was the front month.
The market has slumped on the sharp fall in demand because of the coronavirus pandemic and rising output from Saudi Arabia and Russia after a supply pact collapsed last month. Brent crude fell 66% in the first three months of 2020, its biggest ever quarterly loss. Saudi Arabia's production rose to more than 12 million bpd in the most recent months, according to sources.
"The likelihood of distressed cargoes, increased freight rates, force majeures, strains on storage capacity, VLCC availability will be combining in placing additional downside pressures on petroleum prices," Jim Ritterbusch, president of Ritterbusch and Associates, said in a report.
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 oilcheaper "than water" was hurting the industry.
Trump invited several energy industry executives, including the chief executives of Exxon Mobil and Chevron Corp, to a meeting on Friday to discuss aid for the industry, including possible tariffs on oil imports from Saudi Arabia, an administration source confirmed.
News of those efforts has intermittently bolstered futures prices, but physical grades of crude are deteriorating, as refiners and shippers confront the coming wave of supply and freeze-up in demand. Gasoline demand fell by the most ever in one week, with products supplied, a proxy for demand, dropping by 2.2 million barrels per day to 6.7 million bpd. That augurs for more refining cutbacks down the road.
"Demand is a disaster," said Bob Yawger, director of energy futures at Mizuho in New York. "That's the whole problem here. It's horrible."
The bearish mood has been fueled by a rift within the Organization of the Petroleum Exporting Countries (OPEC). Saudi Arabia and other OPEC members have been unable to agree to a technical meeting in April to discuss sliding prices.
An OPEC-led supply deal fell apart on March 6 when Russia refused to cut output further. Saudi Arabia has already begun to boost output, a Reuters OPEC survey showed on Tuesday, and is expected to pump more in April. [OPEC/O]
"It is very unlikely that OPEC, with or without Russia or the United States, will agree a sufficient volumetric solution to offset oil demand losses," BNP Paribas analyst Harry Tchilinguirian said in a report on Tuesday. - Reuters
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