Oil prices soared on Thursday after US President Donald Trump said he expects Russia and Saudi Arabia to announce a major oil production cut, and Saudi state media said the kingdom was calling an emergency meeting of oil producers to deal with the market turmoil.
Trump said he had spoken to Saudi Crown Prince Mohammed bin Salman, and expects Saudi Arabia and Russia to cut oil output by as much as 10 million to 15 million barrels per day, as the two countries signaled willingness to make a deal.
That set off a swift rally in oil markets, with Brent futures soaring $4.80, or 19%, to $29.56 a barrel by 11:42 a.m. EDT (1542 GMT), while US West Texas Intermediate (WTI) crude rose $4.59, or 23%, to $22.55.
Saudi Arabia was expected to call an emergency meeting of the Organization of Petroleum Exporting Countries. The Wall Street Journal reported that the kingdom would consider dropping output to roughly 9 million barrels per day, or about 3 million bpd less than what it planned on pumping in April.
"The question will come down to, will they be able to agree to something? It's taken couple of weeks of Brent at $25 and WTI at $20 and it seems as if Russians are more approachable than they were a month ago," said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut.
Trump did not specify that the cut referred to barrels per day, but that is the most common way oil markets refer to supply and demand.
Earlier in the session, Brent soared as much as 47%, its highest gain ever. WTI, meanwhile, jumped as much as 35%, which was it second highest ever following an intraday gain of 36% on March 19.
Oil markets have been under pressure ever since early March, when Saudi Arabia and Russia were unable to come to terms on a deal to curb production, and the Saudis responded by boosting output to more than 12 million bpd and shipping out cargoes worldwide at discounted prices. Since then, the worsening of the coronavirus pandemic has severely cut fuel demand, pushing US crude as low as about $20 per barrel.
With fuel demand expected to fall by 20% to 30% in the coming months, pressure was building on the oil producers to come to a deal, and Trump expressed growing frustration about the price of oil and its effect on the energy industry. He is meeting with major energy chief executives at the White House on Friday.
A cut of 10 million to 15 million barrels per day would be unprecedented, and would likely need the participation of numerous countries outside of OPEC and its allies.
Texas regulators are exploring the possibility of cutting production in that state, which produces more than 5 million barrels per day.
"It’s one thing to send optimistic tweets and quite another to coordinate actual production cuts when Russia dragged its feet throughout the OPEC+ era and the US has no controlling authority to implement production limits," said Sandy Fielden, director of oil and products research at Morningstar in Austin, Texas.