Global oil prices jumped on Thursday after President Donald Trump of the United States suggested that Saudi and Russia may cut supply by 10 million barrels.
Following Trump’s comments, Brent crude oil jumped 10.11 per cent to $27.16 early Thursday, while U.S. West Texas Intermediate (WTI) crude rose 8.76 percent to $22.09.
The US President said he would broker a deal between Saudi Arabia and Russia, the world’s second and third-largest oil producers.
According to Mr Trump, the deal would end the ongoing price war that followed the collapse of OPEC’s three-year production cut agreement last month in Vienna, leading to a free fall in prices.
In a tweet on Thursday, Mr Trump noted that he expects Russia and Saudi Arabia to cut back “approximately 10 million barrels.”
It remains unclear how and when the supply cut would begin, if any cuts would take place. Saudi Arabia has said that it wants to hold an emergency OPEC+ meeting, which would include Russia, in the coming weeks.
“Worldwide, the oil industry has been ravaged,” Trump told reporters in Washington earlier on Wednesday. “It’s very bad for Russia, it’s very bad for Saudi Arabia. I mean, it’s very bad for both. I think they’re going to make a deal.”
On Thursday, the benchmark reference for around 60 per cent of global crude purchases,
Brent crude futures contracts for May delivery were seen at about $8.92 higher from their Wednesday closing price in New York, changing hands at $33.66 per barrel in early European trading.
WTI crude futures for May delivery were marked $5.85 higher at $26.16 per barrel.
Trump steps in
Reports said Trump will meet U.S. oil executives Friday in Washington amid an historic collapse in global crude prices. Prices have fallen more than 60 per cent so far this year as production increases, slowing demand amid the coronavirus pandemic.
Earlier in the week, PREMIUM TIMES reported how oil prices suffered the biggest decline on record, pulling U.S. crude prices to the lowest levels in 18 years and below $20 for the first time since February 2002.
This came against the backdrop of travel restrictions, manufacturing sector shut-downs and a looming global recession occasioned by the Covid-19 epidemic.
Saudi Arabia, the world’s second-largest producer behind the United States, is also set to pump a record 12.3 million barrels of crude each day, starting this month, following the collapse of its output limit agreement with OPEC cartel members and Russia.
That surge in output, as well as the ongoing slump for global oil prices, has made drilling in the Permian Basin, a major source of shale deposits that could provide as many as 150 million barrels of oil over the next few decades, economically nonviable.
“The drop in prices on our main export has been quite significant, serious, steep,” Russia President Vladimir Putin said in a government meeting Wednesday. “We have been discussing it with colleagues both here, in our country, and at the international level: with our OPEC partners and I have recently discussed the issue with the president of the United States.
“The Americans are also worried because their profitability from shale oil production is ranging, by various estimates, in the region of $40 per barrel, so this too is a serious test for the U.S. economy,” he added.
Like Russia, Nigeria and other countries relying on oil prices for the financing of governmental obligations have been severely hit by the crash.
The crash in prices, for instance, has forced the Nigerian government to make significant changes to its budgetary projection.
Earlier in the month, the government adjusted its 2020 budget amid measures to contain the effect of the outbreak of coronavirus on the nation’s economy.
The Minister of Finance, Budget and National Planning, Zainab Ahmed, said the government will implement a 50 per cent cut in revenue from privatization proceeds. The government also announced a cut in crude oil benchmark price, down to $30, while crude oil production remains at 2.18 million barrels per day as earlier contained in the budget estimates.
Despite significant adjustments in budgetary projections, analysts are worried that Nigeria may slip into depression amid fear of global recession.
In the midst of the uncertainty, Nigeria faces the challenge of seeking buyers for its unsold crude.
Last week, reports said Nigeria cut its official selling price of crude oil to record lows as the country looks to clear a glut of unsold April-loading cargoes before announcing its May programme.
According to Reuters, the Nigerian National Petroleum Corporation (NNPC) cut its April official selling prices for Bonny Light and Qua Iboe by US$5/bbl.