Will Saudi Arabia & Russia Finally Co-operate?
Oil prices have turned higher at the end of the week following the calling of an emergency OPEC+ meeting next week. Following calls from President Trump to end the stand-off between Saudi Arabia and Russia, Saudi Arabia has announced the meetings for Monday April 6th.
Taking to Twitter yesterday, Trump wrote “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!” Trump went on to say “…..Could be as high as 15 Million Barrels. Good (GREAT) news for everyone!”
With oil prices down around 70% from the year to date highs as a result of the economic damage caused by COVID-19, the need for action has grown immensely. At the March meeting, OPEC announced plans for further productions cuts of 1.5 million barrels per day among its members and a group of non-OPEC producers headed by Russia. However, with Russia refusing to join the agreement, the terms fell through. In a dramatic twist, Saudi Arabia, OPEC largest producer and de-facto leader, threatened to increase its oil production if Russia did not renegotiate.
There are hopes now that Russia and Saudi Arabia will be able to agree a deal. However, despite the relief rally see in oil markets today, there are concerns among big names that the two sides will not be able to agree a deal as large as the one touted by Trump.
Trump Considering Saudi Oil Tariffs
Trump is due to meet with US energy market chiefs today with an aim to establishing a means of helping the struggling US energy sector. According to the Wall Street Journal, Trump is considering applying tariffs to imports of Saudi oil in a bid to drive up demand for domestic production. This week, the EIA reported a tenth consecutive weekly rise in US oil inventories, reflecting the heavy loss of demand since the COVID-19 crisis began. However, such a move is unlikely to motivate Saudi Arabia to work to stabilise the oil market and with the threat of Saudi Arabia further increasing oil production in retaliation, Trump will need to tread carefully.
WTI (Bullish above $ 26)
From a technical viewpoint. WTI prices are fighting to carve out a base here. Price has recovered off the $ 19.20 lows and is now testing the $ 26 level. This is a major level in oil and while below here, a continuation lower is likely. However, if price can trade back above this level, focus will then be on a test of the bearish trend line and monthly pivot at $ 29.36 next.
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