Business & Economy

Oil prices surge on hopes of big crude-production cut

London/New York, Apr 2 (efe-epa).- Crude prices skyrocketed by between 20 percent and 25 percent on Thursday due to hopes that OPEC and non-OPEC countries may meet to discuss significant oil-production cuts.

Brent crude for June delivery closed up 19.98 percent at $29.78 a barrel after US President Donald Trump raised expectations that Saudi Arabia and Russia will slash output to prop up the global price of crude, which has plunged amid the economic slump accompanying the Covid-19 pandemic and a worldwide oil price war.

“Just spoke to my friend MBS (Crown Prince Mohammed bin Salman) of Saudi Arabia, who spoke with President (Vladimir) Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!,” Trump said on Twitter.

“Could be as high as 15 Million Barrels. Good (GREAT) news for everyone!,” the president added.

Brent, Europe’s benchmark crude, had climbed a whopping 46 percent from its Wednesday closing price of $24.82 per barrel after Trump’s tweet but then pared some of its gains after Moscow denied speaking with the Saudis.

On the other side of the Atlantic, West Texas Intermediate crude for May delivery soared by as much as 30 percent before finishing the trading day at $25.32 a barrel, a gain of $5.01, or 24.67 percent, and its biggest-ever single-day percentage increase.

Amid the conflicting remarks by Trump and the Kremlin, Saudi Arabia said Thursday it has called for an urgent meeting of the OPEC+ (the 13 OPEC nations led by the Saudis and 10 non-OPEC countries headed by Russia) to address the drop in the value of crude and “restore the desired balance” to oil markets.

Oil prices have tumbled to levels not seen since 2002 thanks both to the economic damage done by the coronavirus and the breakdown last month of a long-standing pact between Riyadh and Moscow to limit output.

The collapse in oil prices has been particularly hard on the highly leveraged shale oil industry in the United States, whose production costs are much higher than those of competitors in Russia and the Middle East.

A March 6 meeting in Vienna among officials from Russia and from Saudi Arabia and the other 21 members of the OPEC+ group ended without agreement on new production cuts.

But Russia’s unwillingness to go along is not the only problem, as a number of the OPEC+ member-states refused to accept a Saudi proposal to continue to obey the production quotas that expired on March 31. EFE-EPA

apc/dr-mc

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