NEW YORK – Crude prices soared on Thursday after U.S. President Donald Trump said he expects Russia and Saudi Arabia to announce a major oil production cut, and Saudi state media said the kingdom was calling an emergency meeting of producers to deal with the market turmoil.
Trump said he had spoken to Saudi Crown Prince Mohammed bin Salman, and expects Saudi Arabia and Russia to cut oil output by as much as 10 million to 15 million barrels, as the two countries signaled willingness to make a deal.
Trump did not specify barrels per day (bpd), but the market expresses demand and supply in those terms.
Saudi Arabia said it would call an emergency meeting of the Organization of the Petroleum Exporting Countries (OPEC), Saudi state media reported. The Wall Street Journal reported that the kingdom would consider dropping output to roughly 9 million bpd, or about 3 million bpd less than what it planned on pumping in April.
Brent futures rose $4.44, or 18.0%, to $29.18 a barrel by 2:03 p.m. EDT (1803 GMT), while U.S. West Texas Intermediate (WTI) crude rose $3.43, or 16.9%, to $23.74.
Oil prices have slumped since early March, when Saudi Arabia and Russia were unable to come to terms on a deal to curb production, and the Saudis boosted output to more than 12 million bpd and shipped discounted cargoes worldwide.
Since then, the coronavirus pandemic has severely cut fuel demand. U.S. crude prices fell under $20 per barrel a few times in recent days.
“It sounds too good to be true, but if the crude supply and refinery runs now align with today’s extremely low fuel consumption, we will see the market somehow balancing,” said Per Magnus Nysveen, head of analysis at Rystad Energy.
Brent soared as much as 47% during the session, its highest intraday percentage gain ever. WTI jumped as much as 35%, its second highest ever following an intraday gain of 36% on March 19.
Oil prices pulled back to a gain of around 20% soon after posting those intraday percentage highs. Traders questioned whether Russia and Saudi Arabia could agree on such a big production cut.
A senior administration official told Reuters the United States does not know formal details of Saudi Arabian and Russian plans to reduce oil supply yet and will not ask U.S. domestic oil producers to chip in with their own cuts.
“Despite today’s headlines, we remain skeptical that a deal to cut output will materialize,” analysts at Capital Economics said, noting Saudi Arabia is unlikely to cut output unless Russia and possibly other non-OPEC producers, like the United States and Canada, also join in a coordinated reduction.
With fuel demand expected to fall by 20% to 30% in coming months, pressure was building on oil producers to reach a deal, and Trump expressed growing frustration about the crude price and its effect on the energy industry. He is meeting with major energy chief executives at the White House on Friday.
A cut of 10 million to 15 million bpd would be unprecedented, and would likely need the participation of numerous countries outside of OPEC and its allies.
Texas regulators are exploring the possibility of cutting production in that state, which produces more than 5 million bpd.