Coronavirus Outbreak: Oil prices jump on hopes of OPEC, Russia meeting tomorrow on output cuts

Oil bounced back on Wednesday, with US crude jumping over $1, lifted by hopes that a meeting between OPEC members and allied producers on Thursday will trigger output cuts to shore up prices that have crumbled amid the coronavirus pandemic

Reuters April 08, 2020 14:02:22 IST
Coronavirus Outbreak: Oil prices jump on hopes of OPEC, Russia meeting tomorrow on output cuts

Seoul: Oil bounced back on Wednesday, with US crude jumping over $1, lifted by hopes that a meeting between OPEC members and allied producers on Thursday will trigger output cuts to shore up prices that have crumbled amid the coronavirus pandemic.

Brent crude was up by 75 cents, or 2.4 percent, at $32.62 per barrel by 0246 GMT after falling 3.6 percent on Tuesday. US West Texas Intermediate (WTI) crude rose $1.30, or 5.5 percent, to $24.93 a barrel after dropping 9.4 percent in the previous session.

Thursday’s videoconference meeting between members of the Organization of Petroleum Exporting Countries (OPEC) and its allies, including Russia, is widely expected to be more successful than their gathering in early March. That ended in failure to extend cuts, and a price war between Saudi Arabia and Russia amid slumping demand.

Coronavirus Outbreak Oil prices jump on hopes of OPEC Russia meeting tomorrow on output cuts

Representational image. Reuters

But doubts remain over the role of the United States in any production curbs.

“Whether the United States will join output cuts is closely watched as the market’s focus remained on OPEC meeting,” said Kim Kwang-rae, commodity analyst at Samsung Futures in Seoul. “Oil prices have been volatile as the market is in wait-and-see mode.”

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Saudi Arabia, OPEC member countries and Russia are likely to agree to cut output, but that accord could be dependent on whether the United States would go along with cuts.

The US Department of Energy said on Tuesday that US output is already declining without government action.

“Saudi Arabia and Russia continue to hammer out a deal ... What is clear is that the United States must be involved,” ANZ Research said in a note.

US crude production, meanwhile, is expected to slump by 470,000 bpd and demand is set to drop by about 1.3 million bpd in 2020, the US Energy Information Administration (EIA) said on Tuesday.

US crude inventories jumped by 11.9 million barrels to 473.8 million barrels in the week to April 3, according to data from the American Petroleum Institute (API) released on Tuesday.

With a drop in fuel demand amid the virus outbreak, gasoline stocks also rose by 9.4 million barrels, marking the biggest one-week gain in the API figures since January 2017.

Official data from the EIA is due at 10:30 a.m. EDT (1430 GMT) on Wednesday.

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