Update: Brent Oil Rises above $32 on Hopes of Output Deal
Benchmark Brent crude oil futures rose as high as $33.05 a barrel on Friday on rising hopes of a new global deal to cut global crude supply.
Brent crude futures were up 9.3%, or $2.79, at $32.73 a barrel by 1014 GMT. Brent soared as much as 47% on Thursday for its highest intraday percentage gain on record. It closed 21% up, still about half the $66 at which it was trading at the end of 2019.
U.S. West Texas Intermediate (WTI) crude also moved back into positive territory, rising 4.8%, or $1.22, to $26.54 a barrel after advancing by 24.7% on Thursday.
U.S. President Donald Trump on Thursday said that he had brokered a deal that could result in Russia and Saudi Arabia cutting output by 10 million to 15 million barrels per day (bpd), representing 10-15% of global supply. Trump said he had not offered to cut U.S. output.
The OPEC+ oil exporter group is debating cutting global supply by 10 million bpd, an OPEC source said on Friday, adding that any further cuts must include producers from outside the alliance.
Russia and Saudi Arabia both belong to the grouping of members of the Organization of the Petroleum Exporting Countries and its allies, but the United States does not.
Oil prices slumped 65% in the first quarter on a demand slump caused by the global coronavirus outbreak and moves by Russia and Saudi Arabia to flood the market after the failure last month to extend a previous supply pact.
The energy ministry of non-OPEC producer Azerbaijan, meanwhile, said an OPEC+ meeting is planned for April 6 and will be held as a video conference, Russia’s RIA news agency reported.
“There does appear to finally be collective acceptance that the market is in such an extraordinary state of oversupply that coordinated action is needed,” said Callum Macpherson, Investec (ITCFY)’s head of commodities.
“For now, the possibility of ‘something’ happening could make short sellers more wary and help to limit downward pressure on oil prices, but there may need to be more tangible signs of progress fairly soon if a retest of recent lows is to be avoided.”
Saudi could drop production down to about 8.5 million bpd but is likely to be reluctant to go below that because of the desire to maintain associated gas production. Russia, meanwhile, is likely to look for some measure of sanctions relief from Washington, said Helima Croft, global head of commodity strategy at RBC Capital Markets.
The Canadian province of Alberta, home to the world’s third-largest oil reserves, is open to joining any potential global pact to reduce a glut of crude, Premier Jason Kenney said.
Citi analysts forecast a decline in global oil demand of 18-20 million bpd in the second quarter, which could result in the collapse of 2 million bpd of refinery runs, triggering unprecedented 1 billion barrel growth in inventories over two months.