LONDON: Oil prices rocketed on Thursday after US President Donald Trump said Russia and Saudi Arabia planned to end their price war by slashing output.

But gains for Brent North Sea crude of nearly 46 per cent cooled to around 20 per cent as Russia denied it had spoken to Saudi Arabia, the world’s biggest exporter of crude.

After Trump tweeted that Saudi and Russia could slash production by up to 15 million barrels, Brent hit $36.29 per barrel, up almost 46 per cent.

West Texas Intermediate soared around 35 per cent to $27.39.

Gains were trimmed soon after, with Brent up 20.25 per cent at $29.75 per barrel and WTI showing a gain of 23 per cent to $24.98.

With gains remaining substantial over Wednesday’s closing levels, “traders are taking the view the two feuding nations... will come to some agreement in term of lowering output”, said David Madden, analyst at trading group CMC Markets UK.

Trump tweeted that he had spoken to Crown Prince Mohammed bin Salman, who he claimed had spoken with Russian President Vladimir Putin.

“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!” said Trump.

“Could be as high as 15 Million Barrels,” he added in a subsequent post.

But the Kremlin denied Putin had spoken to the crown prince.

“No, there was no conversation,” Putin’s spokesman Dmitry Peskov told Interfax news agency, adding that “so far” there were no plans for such talks.

Saudi Arabia did though call for a meeting of the OPEC+ oil producers to “stabilise the oil market”, just one day after the kingdom boosted supplies to record levels.

The kingdom, which is the cartel’s kingpin, launched last month a vicious price war, after the Organization of the Petroleum Exporting Countries and Russia failed to clinch a deal to slash output as the deadly coronavirus battered oil demand.

Eighteen-year lows

Slashed global demand, along with the price war, sent oil prices to their lowest levels in 18 years this week. WTI slumped below $20, having lost around 65 per cent of its value in the first quarter.

Prices began rebounding on Thursday before Trump’s tweet, thanks to hopes of a Saudi-Russia deal and as China looks to increase its oil reserves.

China’s move helped to boost prices in a week when the oil market experienced an extremely rare situation.

Despite evaporating demand, production has continued apace as Russia and Saudi Arabia vie for market share, with the excess oil struggling to find space in overstretched storage facilities around the world.

This has resulted in some oils, including Wyoming Asphalt Sour, turning negative on price.

Western Canadian Select had earlier this week traded at “four to five dollars. With the transport cost it means that the price is negative”, Per Magnus, head of analysis at Rystad Energy, told AFP.

Analysts meanwhile said the market remained hobbled by sliding demand because of business shutdowns, the grounding of air travel and other social distancing measures put in place to contain the deadly COVID-19 outbreak.

US shale oil producers, which had made the country self-sufficient, have been particularly hard hit by diving prices.

ANZ Bank however said that US prices were being bolstered also by reports that the US energy department may rent space in the country’s emergency oil reserves to local producers.

“This would help drillers store excess crude,” it said.

Published in Dawn, April 3rd, 2020