Trump: ‘The oil industry is being ravaged’
President Trump says the oil-price dispute between Russia and Saudia Arabia will be resolved in coming days.
Oil prices soared Thursday after President Trump said he expects Saudi Arabia and Russia will make huge cuts to their oil production in order to calm the market.
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West Texas Intermediate crude oil, the U.S. benchmark, surged by as much as 35 percent to $25.32 a barrel, while Brent crude oil, the international benchmark, jumped 47 percent to $36.29. Both energy components pared their gains, but were still trading up more than 23 percent.
CORONAVIRUS PANDEMIC ZAPS OIL DEMAND
“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!” Trump tweeted in regard to Saudi Arabia and Russia.
Oil prices crashed to an 18-year low last month after an oil-price war broke out between Saudi Arabia and Russia when the latter refused to join OPEC in deepening production cuts. Saudi Arabia responded by boosting its output to avoid losing market share, resulting in a gush of supply hitting a market that was already experiencing a glut.
To make matters worse, the oil market has seen significant demand destruction as the COVID-19 pandemic curbed the need for gasoline and jet fuel.
While oil traders see Trump's announcement as a sign of good things to come, Damien Courvalin, head of energy research and senior commodity strategist at Goldman Sachs, thinks it's too late for coordinated policy action to help inland markets.
"Coordinated supply cuts would only limit the downside if it precipitated the shut-in of production, yet such an agreement would take time with inland shut-ins already appearing to be required locally," he wrote in a note to clients on March 31.
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