U.S President Donald Trump has said he was considering weighing in on the current oil war impasse between Saudi Arabia and Russia, which coupled with the impact of the coronavirus pandemic has pushed oil prices below 18 year lows.
Trump made the remarks on Thursday, even as it appears current low prices will help American consumers save money at the gas pumps, although it has begun to impact negatively on American drillers.
Speaking at a coronavirus briefing in Washington, Trump said promised to take action at the “appropriate time.”
“We have a lot of power over the situation and we’re trying to find some kind of medium ground,” Trump added.
The U.S. shale industry has found itself caught in the middle of a war over market share between Saudi Arabia and Russia. Talks between the two countries of cutting back production as the coronavirus outbreak sap worldwide crude demand fell apart earlier this month, triggering an all-out price war that has sent oil futures plunging to the lowest in 18 years.
“It’s very devastating to Russia, because the whole economy is based on that, and they have the lowest prices in decades,” Trump said.
“I would say it’s very bad for Saudi Arabia,” he said. “But they’re in a fight, they’re in a fight on price, they’re in a fight on output. At the appropriate time, I’ll get involved.”
Oil industry leaders have urged the Trump administration to find a diplomatic solution. The American Exploration and Production Council said in a March 12 letter that it needs Trump’s help in ensuring “restoration of functioning, stable, global market for oil.” And the head of the American Petroleum Institute, Mike Sommers, also has encouraged the president to engage with Saudi Arabia and Russia to ensure markets aren’t oversupplied.
Prices see rebound
Oil markets headed northward on Thursday, rebounding after Wednesday’s hefty losses saw prices tumble to multi-year lows. But gains are likely only temporary as the measures introduced to combat the coronavirus pandemic are likely have a drastic impact on global demand.
U.S. oil jumped more than 23 percent on Thursday for its best day on record, as it recovered more than 50 percent of the losses from Wednesday’s crash. Brent tumbled 13 percent on Wednesday, while U.S. crude oil lost nearly 25 percent.
On Thursday U.S. West Texas Intermediate crude gained 23.8 percent, or $4.85, to settle at $25.22 per barrel. Given WTI’s 60 percent decline this year, a smaller gain, of course, now accounts for a much larger percentage move. International benchmark Brent crude rose 14.4 percent, or $3.59, to settle at $28.47 per barrel. Prices continued to climb even higher in extended trading.
Thursday’s jump came a day after WTI dropped 24.4 percent to settle at a more than 18-year low of $20.37. It was WTI’s third worst day on record.
Oil has been getting hit on both the supply and demand side. A slowdown in worldwide travel and business activity is weighing on demand, just as powerhouse producers Saudi Arabia and Russia prepare to ramp up production.
The OPEC+ production cuts expire at the end of the month, meaning nations will soon be allowed to pump as much as they please.
“With all kinds of measures being taken – including lock-downs, (partial) suspension of aviation, less commuting between work and home, etc – the impact on global oil demand will be huge,” ABN said, in a research note.
ABN sees oil prices around the $25 a barrel level out to June this year. Citigroup goes further, seeing Brent averaging $30 a barrel this year and $17 through the second quarter.
Helping oil prices push higher was Wednesday’s announcement of the European Central Bank’s €750 billion ($820 billion) programme to purchase securities to support European economies.
However some firms, including Rystad Energy, believe the stimulus measures announced thus far will be insufficient to stop further demand declines.
Another factor which helped to boost price include China reporting no new coronavirus case on Thursday.
Although analysts see further relief for the oil markets coming from the United States buying crude oil for the Strategic Petroleum Reserve within the next two weeks, according to Bloomberg.
The move, which could total 77 million barrels of crude, aims to replenish the SPR by taking advantage of low oil prices while providing some much needed support for the local oil industry which has suffered a substantial blow by the latest oil price crash, especially in the shale patch.
Thursday’s gains notwithstanding, WTI is still far from prior highs, and many analysts believe prices will head even lower before any type of turnaround. It’s on pace for its worst month ever after falling more than 46 percent, and is 63 percent below its 52-week high from last April. The losses have been swift and steep. As recently as January, WTI traded at $63 per barrel.
