Oil prices rally after Trump says Saudi Arabia, Russia can strike deal soon
Brent and WTI crude oil prices managed to edge up from recent lows.
Oil futures prices have retraced slightly from the 18-year low levels recorded on Wednesday 01 April.
Oil prices sunk to 18-year low on Wednesday
Price of a barrel of Brent crude had sunk to US$25.32 on Wednesday – its lowest level since 2003, while West Texas Intermediate (US crude) plummeted to US$19.38 – a price point not seen since 2002, according to IG oil futures trading data.
Oil prices have been steadily declining for the last one month, thanks to a collapse in global demand resulting from the coronavirus pandemic as well as an untimely dispute between Saudi Arabia and Russia.
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Oil price rallies after Trump says Saudi Arabia, Russia can ‘work it out’
Brent and US Crude are both trading around 10% higher at US$27.66 and US$23.65 per barrel as at 07:00 GMT on Thursday 02 April.
The rally came after US President Donald Trump stated during a regular White House press meeting that he has ‘confidence’ that Saudi Arabia and Russia will be able ‘work it out’, referring to the ongoing oil price and supply disagreement between both countries.
‘I think that Russia and Saudi Arabia at some point are going to make a deal, in the not-too-distant future, because it's very bad for Russia, it's very bad for Saudi Arabia, Trump said on Wednesday, adding that he had "great’ discussions with Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin in recent days regarding their issues.
He expects a deal to be struck within the next ‘few days’.
The coronavirus pandemic has also caused governments around the world to impose lockdowns on resident movements; national borders in some cases. With all types of travel now reduced to a minimum, daily global oil consumption is expected to fall year-on-year from 22 million to 15 million barrels in April, according to commodity research firm Energy Aspects.
"Oil prices failed to keep pace, with growing (coronavirus) lock-down measures and reports that this could drive global demand down 20%, potentially pushing the world to run out of storage capacity," Morgan Stanley analyst Devin McDermott had written in a note earlier this week.
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Oil prices down by 66% since start of 2020
The oil war between Saudi Arabia and Russia had started earlier last month, after Saudi Arabia decided to raise oil production by two million barrels a day and slash prices by between US$6 to US$8 per barrel, in response to Russia’s insistence on keeping present output levels despite falling demand globally due to the coronavirus outbreak.
Oil prices then crashed over 30% – the largest one-day drop since 1991. The lack of any resolution, alongside the coronavirus-triggered global market meltdown of recent weeks, only resulted in greater downward pressure on oil prices.
Oil prices are down an average of 66% year-to-date.
From a technical perspective, IG UK chief market analyst Chris Beauchamp wrote on 01 April that ‘a bounce above US$23 (a barrel) might begin to point to a more optimistic short-term view for longs, but it seems like a test of US$20 is only a matter of time’.
Read also: Oil price keeps declining. How much lower can it go?
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