Global oil prices climbed off the floor of 18-year lows this morning after US president Donald Trump said he expected Saudi Arabia and Russia to reach an agreement soon to put an end to their price war.
The combination of a production war and a slump in global demand due to widespread lockdowns caused by the coronavirus pandemic had sent benchmark Brent crude as low as $24 at the beginning of this week.
At the beginning of the year, Brent had briefly traded over $70, but has subsequently shed two-thirds of its value.
However, prices jumped about nine per cent today after Trump said he expected a deal to be agreed “within days”, having spoken to the leadership of both countries.
Speaking at a press conference, the president said: “It’s very bad for Russia, it’s very bad for Saudi Arabia. I mean, it’s very bad for both. I think they’re going to make a deal”.
Russian president Vladimir Putin seemed to echo Trump’s comments when he called for producers and consumers alike to work together to find a solution for the “challenging” situation.
The current price war broke out when Russia refused to extend production curbs to guard prices against the coronavirus outbreak at a meeting of oil producer cartel Opec+ in March.
In response, de facto Opec leader Saudi Arabia removed all curbs on its own production, flooding the market and forcing prices in freefall.
Yesterday the gulf kingdom produced 12m barrels of crude oil, a “clear sign”, according to ING, that it was not yet ready to back off in any price war.
Other analysts warned that despite the positive noises there was still a long way to go before prices would stabilise.
Kang Wu, head of Asia analysis and S&P Global Platts, said that prices would have to drop as low as $10 before supply curtailment measures were forced.
This morning’s oil gains helped push up the FTSE 100 after yesterday’s grim start to the quarter, with blue-chips BP and Shell both up.