Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner.

Oil soars after Trump says Saudi Arabia, Russia to cut supply

The Haven accommodation jackup rig, owned by Jacktel AS, right, stands connected to the drilling platform, center, on the Johan Sverdrup oil field off the coast of Norway in the North Sea, on Tuesday, Dec. 3, 2019. Sverdrup's earlier-than-expected start in October broke a long trend of underperformance for Norway's overall oil production. Photographer: Carina Johansen/Bloomberg
The Haven accommodation jackup rig, owned by Jacktel AS, right, stands connected to the drilling platform, center, on the Johan Sverdrup oil field off the coast of Norway in the North Sea, on Tuesday, Dec. 3, 2019. Sverdrup's earlier-than-expected start in October broke a long trend of underperformance for Norway's overall oil production. Photographer: Carina Johansen/Bloomberg

Oil soared after U.S. President Trump said that he expects Saudi Arabia and Russia to cut production back by 10 million barrels or more after he spoke with Crown Prince Mohammed Bin Salman on Thursday.

It wasn’t clear if Trump meant 10 million barrels a day, but the announcement caused West Texas Intermediate prices to surge by as much as 35% while Brent gained as much as 47%. He also told CNBC that the cut could be up to 15 million barrels.

The move comes after oil was already climbing after Beijing instructed government agencies to start buying cheap crude for its strategic reserves.

Despite the president’s optimism, Saudi Arabia has not appeared to relent its bid to flood the market yet, saying on Wednesday it was pumping at a record and had this week loaded almost 19 million barrels of oil in a single day. Meanwhile, Russia has said they are not satisfied with the oil price.

If collective action does remove 10 million barrels a day from the market that would be the equivalent of about 10% of world demand prior to the impact of coronavirus. That may not be enough to stop the pain that’s rippled across the energy industry as demand craters with the coronavirus outbreak shutting down economies around the world, according to Ben Luckock, co-head of oil trading at Trafigura. The trading houses raised its oil demand loss estimate to around 35 million barrels a day.

“We have no hope of production cuts matching the demand destruction,” he told Bloomberg, adding that by the middle to late April, “oil will have come out of the ground and will struggle to find a home.”

That view is consistent with a Goldman Sachs note earlier this week, citing that any conceivable oil production cut by the U.S., OPEC+ and Canada would still “fall well short” of their estimated 26 million barrels a day of demand loss and only provide “fleeting support to inland crude prices.”

Prices:
  • Brent for June rose $5.61 to $30.35 a barrel as of 10:58 a.m. New York time, having earlier gained as much as 47%
  • West Texas Intermediate for May climbed $5.53 to $25.84 a barrel

China’s move to purchase oil for its strategic reserves comes as the physical crude market shows deepening signs of strain. Dated Brent, the benchmark for two-thirds of the world’s physical supply, was assessed at $15.135 on Wednesday, the lowest since at least 1999. Crude has slipped below $10 in some areas including Canada and shale regions in the U.S., Belarus wants to buy Russian oil for $4, while some grades have posted negative prices.

As supply balloons, there are growing signs that the world is running out of places to store the glut.

“The sheer size of the surplus should put downward pressure on the market as we move through the quarter,” said Warren Patterson, head of commodities strategy at ING Bank NV.

Recommended for you

More from Energy Voice

Latest Posts