Crude prices posted their biggest-one day gains on record on Thursday after 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), though the market expresses demand and supply in those terms. Such a sizeable deal, however, would likely require participation from other big producers outside of the OPEC cartel.
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 $5.20, or 21.0%, to settle at $29.94 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $5.01, or 24.7%, to settle at $25.32.
Despite the huge gains, oil prices have still lost more than half their value this year. The market slumped in 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.
“The question will come down to, Will they be able to agree to something? It’s taken a couple of weeks of Brent at $25 and WTI at $20 and it seems as if the Russians are more approachable than they were a month ago,” said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut.
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, after an intraday gain of 36% on March 19.
Oil prices pulled back from those highs as traders questioned whether Russia and Saudi Arabia could actually 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, 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.
Texas regulators are exploring the possibility of cutting production in that state, which produces more than 5 million bpd.