Oil prices jumped nearly 25 percent Thursday after President Trump announced he believes Russia and Saudi Arabia will cut their flood of oil production by 10 to 15 million barrels.
The President first revealed the possible deal in a telephone interview on CNBC, saying the deal should be announced soon by Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman.
West Texas Intermediate crude surged 24.67% to settle at $25.32 per barrel, for its largest single-day percentage gain in history. Given WTI’s 59% decline this year a smaller gain, of course, now accounts for a much larger percentage move. International benchmark Brent jumped 21% to settle at $29.94 per barrel, in what was also its best day on record.
Trump made his comments in a telephone conversation with CNBC’s Joe Kernen.
The president said in a tweet later that a production cut would be “great for the oil & gas industry,” and that the cut could be “substantially more” than 10 million barrels.
Donald J. Trump✔@realDonaldTrump
“Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President 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!”
Oil production is typically discussed in terms of barrels per day, but Trump made no reference to the time frame of the cuts. Additionally, it was not clear how the cuts would be distributed across oil-producing countries.
RBC commodity strategist Helima Croft said the U.S. could have to give up something in return.
“What we know is the Saudis were looking at this through the lens of the financial crisis and believe they needed a response commensurate to 08/09,” she said, referring to the collapse of prices during the 2008-09 financial crisis.
“The question is can Trump put together the package that gets them to do that?” Croft said. “We know there’s an emergency OPEC meeting. They will be looking for signs that U.S. production will be curtailed. They will be watching what happens with the Texas Railroad Commission and with Canada,” she added.
Saudi Arabia on Thursday, via its official press agency, called for an “urgent” meeting between OPEC and its allies.
“Today, the Kingdom calls for an urgent meeting for OPEC+ group and other countries, with aim of reaching a fair agreement to restore the desired balance of oil markets,” the Saudi Press Agency said.
U.S. Sen. Jim Inhofe (R-Okla.) praised President Trump for his leadership after his announcement that Saudi Arabia and Russia will reduce their oil production:
“Excessive dumping from Saudi Arabia and Russia has been flooding our oil market and driving down oil prices beyond what is sustainable to lift a barrel. Prices that low aren’t just a result of low demand, they are an effort to hurt our domestic oil and gas producers here in Oklahoma. President Trump is right to demand Saudi Arabia and Russia reduce their output and provide relief. Additionally, the president’s leadership here preserves our additional tools, including 232 investigations, in the event that Saudi Arabia and Russia don’t adhere to their agreement.”
Sen. Inhofe explained he spoke Thursday with Saudi Ambassador, Princess Reema bint Bandar and she affirmed her country has called for an OPEC meeting to negotiate a resolution to global oil production and stabilize the global oil market.
“I told the Ambassador that we want to see results, and I look forward to seeing the details of these efforts in the coming days.”
On March 18, Inhofe sent a letter to Secretary Ross, encouraging him to initiate a Section 232 investigation into Saudi Arabia and Russia for their anticompetitive activity. He followed up that letter with another one, signed by eight other senators, also encouraging an investigation into the excessive dumping.
Source: CNBC and Sen. Inhofe’s office