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Oil prices climbed again on Friday, boosted by hopes the Organization of the Petroleum Exporting Countries and its allies will deliver a production cut and end a devastating price war between Saudi Arabia and Russia.
After initially wobbling on Friday, West Texas Intermediate crude for May delivery CL.1, +4.82% rose $1.16, or 4.6%, to $26.49 a barrel. On Thursday the contract surged 24.7% to settle at $25.32 a barrel after tapping a high of $27.39 on the New York Mercantile Exchange. June Brent crude BRNM20, +8.92% climbed $2.63, or 8.8%, to $32.57 a barrel after a 21% gain on Thursday that left it at $29.94 a barrel.
The WTI and Brent crude benchmarks marked their largest one-day percentage gains on record Thursday, based on the front months, according to Dow Jones Market Data.
Saudi Arabia, Russia and other major producers were set to debate production cuts of at least 6 million barrels a day in a virtual meeting on Monday, The Wall Street Journal reported.
“The OPEC+ meeting will be open to all producers, not only those in the group. There is still plenty of skepticism as to whether a production cut of 10-15 million barrels per day will be effective at supporting prices,” said Stephen Innes, chief global markets strategist at AxiCorp, in a note to clients.
“This is all bullish for oil from a sentiment perspective and probably averts the worst-case scenario for oil storage being full during Q2 and oil prices falling into the single digits. But with the Q2 oversupply estimated at 20-30mb/d, whatever cuts are agreed will not be sufficient to address the near/medium-term oversupply,” he said.
Trump said he will also meet with oil-industry chief executives, which The Wall Street Journal reported will happen Friday. “We don’t want to lose our great oil companies,” he said.
Oil surged Thursday after Trump said Saudi Arabia and Russia were set to curb production by 10 million to as much as 15 million barrels, ending a devastating price war that sent the U.S. crude benchmark to an 18-year low last month as oil dropped by more than 60% in the first quarter
A report from Bloomberg cited an OPEC delegate who said a cut on the magnitude of 10 million barrels was realistic.
Analysts said a cut on that order would at least slow a flood of unneeded crude that is straining storage infrastructure as demand collapses as a result of the global COVID-19 pandemic.
“Ten million barrels a day seems a target that on one hand seems too large to be credible but on the other would be insufficient to bring the market into balance at least in the near term if demand destruction is 20+ million barrels a day,” said Jason Gammel, analyst at Jefferies. “However, even if it is insufficient for balance, taking oil out of the market will slow the pace of inventory build at an important time.”
