Oil 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 oil 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. While he said barrels, oil traders believed he meant barrels per day (bpd).
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 were up $5.80, or 23.4%, to $30.54 a barrel by 12:23 p.m. EDT (1623 GMT), while U.S. West Texas Intermediate (WTI) crude rose $4.91, or 24.2%, to $25.22.
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 during recent days.
"The oil supply-demand situation is untenable, and if there are broad production cuts, it could bring the oil market closer to balance. But there is a lot of uncertainty here, and it likely takes lifting COVID-19 related stay-at-home orders for the oil market to recover," said Josh Young, Chief Investment Officer at Bison Interests, a Houston investment firm.
Brent soared as much as 47% during the session, its highest gain ever. WTI jumped as much as 35%, its second highest ever following an intraday gain of 36% on March 19.
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 barrels per day 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.
"It’s one thing to send optimistic tweets and quite another to coordinate actual production cuts when Russia dragged its feet throughout the OPEC+ era and the United States has no controlling authority to implement production limits," said Sandy Fielden, director of oil and products research at Morningstar in Austin, Texas.