Saudi Arabia Seeks Urgent OPEC+ Meeting To Stabilise Oil Market

Andrew Cummings
April 2, 2020

Demand for products made from crude oil, such as gasoline and jet fuel, has plummeted as COVID-19 forced states across the country to issue "stay-at-home" orders.

West Texas Intermediate soared around 35 percent to $27.39.

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.

Oil markets have been under pressure ever since early March, when Saudi Arabia and Russian Federation were unable to come to terms on a deal to curb production, and the Saudis responded by boosting output to more than 12 million bpd and shipping out cargoes worldwide at discounted prices.

In Asian trade Brent crude oil was up by more than 5% to over $26 a barrel, while U.S. oil was some 4% higher.

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

Saudi Arabia was expected to call an emergency meeting of the Organization of Petroleum Exporting Countries.

According to Reuters - citing a senior Gulf source familiar with Saudi Arabia - the kingdom "has always welcomed cooperation among oil producers to stabilise the market, based on the principles of fairness and equity". WTI slumped below $20, having lost around 65 percent of its value in the first quarter.

"Oil prices are higher on news that President (Donald) Trump will hold a round table discussion with the country's top oil executives", said AxiCorp global market strategist Stephen Innes.

Despite evaporating demand, production has continued apace as Russian Federation 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.

The collapse in prices has threatened the once-booming USA drilling industry with bankruptcies and massive layoffs, and Washington has scrambled for ways to protect the sector. "The market is starting to signal that not only is there no demand for this crude, eventually there could be nowhere for it to go", an analyst said.

Shale producer Whiting Petroleum, which was once the largest oil producer in the U.S. state of North Dakota, filed for bankruptcy on Wednesday.

State oil giant Saudi Aramco had yesterday asked major energy service companies to stand with its plans to put oil supply on full throttle, at the 12mbpd capacity "starting April 1 and for the foreseeable future", an industry source noted, and advised them to further raise it to 13mbpd.

"This would help drillers store excess crude", it said.

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