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Oil rises as hopes build for global production cut

CoronavirusApr 07, 2020 06:41AM ET
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© Reuters. An oil pump jack pumps oil in a field near Calgary

By Ahmad Ghaddar

LONDON (Reuters) - Oil prices clawed their way into positive territory on Tuesday as hopes that the world's biggest producers will agree to cut output outweighed analyst fears that a global recession in the wake of the coronavirus crisis could be deeper than expected.

Brent crude (LCOc1) was up 83 cents, or 2.5%, at $33.88 a barrel by 0936 GMT after falling more than 3% on Monday. West Texas Intermediate (WTI) crude (CLc1) was up 95 cents, or 3.6%, at $27.03, having dropped nearly 8% in the previous session.

"Oil prices are holding their ground with market expectations building on an agreement for an output reduction of 10 million barrels per day (bpd), or at least close to 10 million bpd," BNP Paribas (PA:BNPP) analyst Harry Tchilinguirian told the Reuters Global Oil Forum.

The world's main oil producers, including Saudi Arabia and Russia, are expected to agree to cut output at a meeting on Thursday, though that would depend on the United States joining in, sources told Reuters.

However, the threat of a major recession hangs over the market after the hit to economic activity as a result of the coronavirus pandemic, with half the global population under some form of lockdown or social distancing measures.

Worldwide oil demand has dropped by as much as 30%, coinciding with moves by Saudi Arabia and Russia to flood markets with extra supply after a previous output deal fell apart.

"With 28 million bpd of oversupply in the oil market in April and 21 million bpd in May, the global coordinated production cuts that are really needed may be too large for the producers to accept; perhaps twice as large as the numbers being discussed," said Rystad Energy's Bjornar Tonhaugen.

The Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia, a grouping known as OPEC+, had been curtailing production in recent years even as the United States ramped up its own output to become the world's biggest crude producer.

There are questions whether the United States would join any coordinated action to curb supply.

U.S. President Donald Trump on Monday said that OPEC had not asked him to push domestic oil producers to cut production to buttress prices. He also said that U.S. output was declining in response to falling prices.

"I think it's happening automatically, but nobody's asked me that question yet, so we'll see what happens," the president told a press briefing on Monday.

Coordinated action by U.S. oil producers would typically be a violation of antitrust laws.

A global recession that economists in a Reuters poll say is under way is likely to be more serious than was expected a few weeks ago, the latest survey suggested.

Oil rises as hopes build for global production cut
 

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Comments (8)
Tee Zee
Tee Zee Apr 07, 2020 7:31AM ET
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So long price stays higher for an additional day , all of them will keep quiet ... then comes thursday 🤣
Ben Ju
Ben Ju Apr 07, 2020 6:51AM ET
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So, the likelihood that they the US wont agree with the proposed cuts on Thursday, is quiet high.
Ben Ju
Ben Ju Apr 07, 2020 6:50AM ET
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So, the likelihood that they wont agree on Thursday is quiet high...
Chao Yu
Chao Yu Apr 07, 2020 6:06AM ET
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Trump wants OPEC to agree to a massive cut (quote: "I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!"), at the same time he is accusing OPEC of being an illegal cartel..... make your own judgements :)
Elias Abllah
Elias Abllah Apr 07, 2020 5:21AM ET
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Saudi just play by the ear
Jo Joe
Jo Joe Apr 07, 2020 3:58AM ET
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If Russia & Saudi are willing to cut 5m each.. Output by country could be US 15m, Russia 5m, Saudi 5m like that? Is this realistic?
Idar Polden
Idar Polden Apr 07, 2020 3:58AM ET
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Has trump confirmed to go the meeting? if nobody shows up from us, the olprice will collapse.
Chao Yu
Chao Yu Apr 07, 2020 3:58AM ET
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Idar Polden Even if US attends the meeting, Trump will never agree to cuts. He expects OPEC & Russia to do all the cutting....
Tre Hsi
Tre Hsi Apr 07, 2020 3:58AM ET
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Chao Yu   of course, his idea of negotiation is that other people agree to all his demand and he makes no concessions
Medi tradeGe
Medi tradeGe Apr 07, 2020 3:58AM ET
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USA has to agree on cut otherwise collapse will be massive
Phyozin Htun
Phyozin Htun Apr 07, 2020 3:51AM ET
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Thursday meeting again?
Danh Thao
Danh Thao Apr 07, 2020 3:40AM ET
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Don't sit there and flatter each other and take your breath away. The problem is that wti on the ground has no need. at least another 4-5 months
 
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