Crude oil price moved by around eight percent yesterday, a day after the biggest rout in nearly 30 years as investors eyed the possibility of economic stimulus and Russia signalled that talks with the Organisation of Petroleum Exporting Countries (OPEC) remained possible.
The crash in oil price has also prompted fuel marketers, under the umbrella of Major Oil Marketers Association of Nigeria (MOMAN), to restate their call for the reform of the country’s petroleum industry, especially the removal of petrol subsidy.
Also yesterday, the House of Representatives set up a committee to probe the impact of the oil price volatility on the economy.
The global benchmark, Brent crude futures, was up $2.84, around eight per cent, to $37.20 a barrel, after hitting a session high of $38.22 a barrel.
West Texas Intermediate (WTI) crude gained $2.53, or around eight per cent, to $33.66 a barrel, after hitting a high of $34.60.
Both benchmarks plunged 25 per cent on Monday, dropping to their lowest levels since February 2016 and recording their biggest one-day percentage declines since January 17, 1991, when oil prices fell at the onset of the first Gulf War.
Russian Energy Minister, Mr. Alexander Novak, said yesterday that Moscow was open to further cooperation with OPEC to stabilise the oil market.
“I want to say the doors aren’t closed,” Novak told the state-run Rossiya 24 television network.
The lack of agreement with OPEC on extending production cuts “does not mean that in the future we can’t cooperate with OPEC and non-OPEC countries.
“If necessary, we have various tools, including reduction and increasing production,” Novak said, adding that new agreements can be reached.
“We have planned the next meetings in May or June to assess the situation on the market.”
Russia refused to agree to a proposal by OPEC ministers led by Saudi Arabia for a drastic cut of 1.5 million barrels per day, with Russian oil companies fearing loss of market share and of competitiveness against US shale production.
Saudi Arabia responded on Sunday with the biggest cut in its prices of the past 20 years in a bid to win market share.
Saudi Aramco said yesterday it would boost its supply of crude oil to 12.3 million barrels per day in April, flooding markets as it escalates a price war with Russia.
Novak said Russia could also swiftly increase its production.
“We have the potential for growth in production. I think in the short-term, we can increase by 200-300,000 barrels (per day) with the prospect of 500,000 barrels, that’s in the near future.”
He added that Russia is competitive in the world markets because of low production costs.
US President Donald Trump on Monday said he would be taking “major” steps to protect the US economy against the impact of the spreading coronavirus outbreak, while Japan’s government plans to spend more than $4 billion in the second package of steps to cope with the virus.
Trading volumes in the front-month for both contracts hit record highs in the previous session after three years of cooperation between Saudi Arabia and Russia and other major oil producers to limit supply fell apart on Friday, triggering a price war for market share.
Saudi, the world’s biggest oil exporter, escalated tensions with plans to supply 12.3 million barrels per day (bpd) in April, well above current production levels of 9.7 million bpd, Saudi Aramco CEO Amin Nasser said yesterday.
April’s crude supply will be “300,000 barrels per day over the company’s maximum sustained capacity of 12 million bpd,” Nasser said in a statement received by Reuters.
Price pared gains by over $1 on the news.
Novak said he did not rule out joint measures with OPEC to stabilise the market, adding that the next OPEC+ meeting was planned for May-June.
But in response, Saudi Arabia’s energy minister told Reuters he did not see a need to hold an OPEC+ meeting in May-June if there was no agreement on what measures should be taken to deal with the impact of the coronavirus on oil demand and prices.
“I fail to see the wisdom for holding meetings in May-June that would only demonstrate our failure in attending to what we should have done in a crisis like this and taking the necessary measures,” Prince Abdulaziz bin Salman said.
The sentiment was also lifted after Chinese President Xi Jinping visited Wuhan, the epicentre of the coronavirus outbreak, for the first time since the epidemic began, and as the spread of the virus in mainland China slows sharply.
China, the world’s second-largest oil consumer, is trying to get people in hard-hit Hubei province back to work by using a mobile phone-based monitoring system that will allow people to travel within the province.
Crude was also supported by hopes for a settlement to the price war and potential US output cuts, although analysts warned gains may be temporary as oil demand continues to be hit by the virus outbreak, which has spread beyond China and prompted Italy to implement a nationwide lockdown.
US shale producers rushed to deepen spending cuts and could reduce production after OPEC’s decision to pump full bore into a global market hit by shrinking demand.
