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Oil extends recovery as Trump hints at intervening in Saudi-Russia price war

Published 03/20/2020, 02:38 AM
Updated 03/19/2020, 10:25 PM
© Reuters.

By Koustav Samanta

SINGAPORE (Reuters) - Oil prices recovered further on Friday, following steep gains in the previous session after U.S. President Donald Trump hinted he may intervene in the price war between Saudi Arabia and Russia at an "appropriate time".

Prices were also supported by United States' plans to buy up to 30 million barrels of crude oil for its emergency stockpile by the end of June, while regulators in the country's largest oil-producing state Texas were reportedly considering curtailing production.

The more active West Texas Intermediate (WTI) crude futures contract for May was up 43 cents, or 1.7% at $26.34 a barrel by 0540 GMT. The contract rose as much as 5.5% to $27.34 per barrel earlier in the session.

U.S. crude futures for April (CLc1) also rose 43 cents to $25.65 a barrel. The front-month April contract, which spiked 24% on Thursday, expires later on Friday.

"An astonishing rebound in crude oil prices overnight was primarily driven by U.S's consideration to intervene in the oil market by increasing strategic reserves, while slashing some oil production," said Margaret Yang, market analyst at CMC Markets.

"The underlying issue is that global energy demand is falling sharply as more countries join the 'lockdown' club. The severity of Covid-19 for the macro-economy could exceed anyone's expectation, and it could last for a long period of time."

Brent crude futures (LCOc1) climbed 28 cents, or about 1%, to $28.75 per barrel.

The international benchmark rose 14.4% on Thursday in its biggest one-day gain since September, but was on track for its fourth consecutive weekly drop on Friday.

U.S. crude and Brent have both collapsed about 40% in the last two weeks since talks between the Organization of the Petroleum Exporting Countries and its allies, including Russia, broke down, which led Saudi Arabia to ramp up supply.

The Trump administration is considering a diplomatic push to get Saudi Arabia to close its taps and using the threat of sanctions on Russia to force them to reduce output, the Wall Street Journal reported, quoting unidentified sources.

"The outsized gains by WTI reflect the hope and not the reality of the U.S. shale industry. Russia and Saudi Arabia have zero interest in helping US shale survive. Just the opposite, in fact," said Jeffrey Halley, senior market analyst at OANDA.

© Reuters. The sun sets behind a crude oil pump jack on a drill pad in the Permian Basin in Loving County

"Once this reality finally sets in, I expect the rally in oil to disappear as quickly as it began."

Latest comments

Trumps intervention is useless between saudi and russia, dont get fooled the trump is gonna put sanctions on russian oil, russia is not iran or venezuela, first of all they are large oil producers if they put sanctions on russian oil , crude oil will explode back to the 70-80 usd ber barrel if not even more, the only thing trump can do is impose an embargo on russian oil from being discarged in us ports, after that russian oil will find its self waiting or delivered at other destinations around the world. Russia is clever enough that most of there supplies are being paid in other currencies, they own there own tanker company which is one of there world largest called sovcomflot, + they have pipelines to euope and china, delivery point to ships from the baltic, caspian black and the pacific seas. Its not gonna be that easy mr t
This is a weird thing ,I ever never heard. Eventhough Saudi MBS didnt do the price war the price of oil will dwindle down cause by demanding. The price go down make Saudi go into austerity.
China is Saudi Arabia's #1 customer.
bounce then continue down trend. States stopping non essential movement, Saudi's aren't gonna stop pumping oil out, and demand is weak.
USA and world need to join OPEC to stabilize prices.  Great depression had wheat price fixing which worked initially then due to greed and poor economic foresight collapsed again.  Drastic times require drastic measures.
OPEC and world are doing it on purpose to weaken the USA.
That appropriate time is after US elections off course
Not oil crisis. Oil price crisis infact
so essentially US is refusing to cut back on production or impose a limit but threatening other to get a cap going. how wonder free market works.
No every single US company has cut production. The Saudis and Russians keep threatening to produce more and more even with less demand and just about every storage facility full. These trash governments are manipulating the markets and deserve to be corrected like the little children they are.
The US government can't order producers to cut back on production and it's against the law for US producers to collude to fix prices simply because we have a free market. Russia and Saudi Arabia are dealing with market forces unleashed by US shale and the corona virus but now, US shale has to deal with market forces unleashed by Russia and Saudi Arabia. I expect oil prices to remain down until all involved reduce or quit production, starting with producers with the highest break-even cost, i.e., shale and deep-water fields. Saudi Arabia has the lowest break-even cost and Russia next but they need higher profits since oil is their main source of national income. Cutting production to support prices have resulted in subsidizing US shale as they lost market share. So now, they say enough is enough and want their market share back - great for us at the gas pump, as consumers, a tax cut according to Trump.
Yeah...a deflationary tax cut threatening our way of life. Gas prices were already low when adjusted for inflation and state taxes.
oh yeah??
yeah
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