Oil continued climbing after its biggest ever single-day gain as U.S. President Donald Trump waded into the price war between Saudi Arabia and Russia that has rocked crude markets amid diminishing demand.
Futures in New York increased as much as 5.7% following the biggest spike on record Thursday, rebounding from the lowest settlement since 2002. Oil has been whipsawed this week as investors weigh further stimulus measures to combat the impact of the coronavirus pandemic against collapsing demand and an impending supply flood from the world’s biggest crude producers.
Trump said he could intervene in the price war and that he was searching for “medium ground” to break the deadlock as he faces calls from lawmakers to help the domestic oil industry. The U.S. also said it would start filling its strategic reserves by buying 30 million barrels of American crude.
Oil has clawed back some losses even as traders brace for the market rout to continue below $20 a barrel, according to a Bloomberg survey. While Saudi Aramco said it will cut domestic refining to free up more crude for export, analysts at MUFG Bank Ltd. said the price war is a “lose-lose strategy” for the kingdom and Russia, with the fiscal and revenue outlook for both countries challenging if crude holds below $40 for a protracted period.
“The amount of supply coming from OPEC+ in the coming months still dwarfs the decision by the U.S.” to fill its strategic reserves, said Howie Lee, an economist at Oversea Chinese Banking Corp. in Singapore. Crude buying by the U.S. is a “drop in the ocean,” he said.
Saudi Arabia has ordered state-run Aramco to keep output at a record 12.3 million barrels a day over the coming months, but in a surprise move, both the kingdom and Iraq cut the rebates on freight costs they give to customers, effectively lifting prices for some buyers in Europe and the U.S.
West Texas Intermediate for April delivery, which expires Friday, rose as much as $1.43 to $26.65 a barrel on the New York Mercantile Exchange, trimming a fourth weekly loss. The more-active May contract added 2.2% to $26.47 as of 1:30 p.m. in Singapore.
Brent crude for May increased 27 cents, or 1%, to $28.74 a barrel on the ICE Futures Europe exchange after climbing 14% on Thursday. The global benchmark was at a premium of $2.47 to WTI for the same month.
Trump said he would take action in the oil dispute at the “appropriate time,” adding that low prices are currently akin to a tax cut for American consumers. As a support measure for U.S. drillers, the administration plans to buy as much as 77 million barrels of oil in total over time.
The American shale industry has found itself caught in the middle of a fight over market share between Saudi Arabia and Russia. The sector has so far scaled back operations and is also threatened with a wave of bankruptcies.