Oil prices have risen from the 18-year low to which they had plummeted following the announcement by US President Donald Trump and Russian President Vladimir Putin that talks would take place with the aim of stabilising energy markets.
Trump and Putin
Presidents Trump and Putin shake hands after meeting in Helsinki in 2018.
Both Brent crude and US crude were up - the former by 61 cents, around 2.7%, a barrel and the latter by $1.04, around 5.2% - this morning after hitting their lowest levels since 2002.
The drop in fuel demand due to the ongoing coronavirus outbreak, combined with a race for market share between Russia and Saudi Arabia after OPEC and other producers were unable to agree on deeper cuts to support oil prices early in March, has created a perfect storm for oil markets.
The US President announced the news that he would speak to his Russian counterpart following a call into the Fox News morning news and talk show "Fox & Friends", during which he offered a lengthy defence of his attempts to forge a relationship with Russia.
"Right after this call I'm speaking to a gentleman named Vladimir Putin. That's my next call," Trump told the Fox News hosts when asked about uncertainty in the oil market sparked by a feud between Russia and Saudi Arabia.
Trump also said that he and Putin would potentially discuss trade, the situation in Venezuela and the outbreak of Covid-19.
During the phone call to Fox & Friends, the President also railed against critics of his approach to Russia, reminding viewers that the country was an ally during World War II, and Germany was an enemy during that time.
The two presidents agreed to talks between their respective top energy officials during a phone call, the Kremlin said yesterday.
While the futures market is beginning to see a recovery, physical cargoes are selling in some regions at single digits, with some vendors offering large discounts.
“The gap between physical assessments and futures reflects the differences between the realities on the ground and speculation about efforts to ease that pressure going forward,” JBC Energy said.
The massive drop in prices has taken about 60% off oil prices this year, leading a commissioner at the Texan state energy regulator to renew calls for restrictions of the production of crude due to the national supply glut.
The market is currently so well supplied that Brent future contracts for May are trading at a huge discount in the widest contago spread ever seen. A contago market implies that traders are expecting oil prices to be higher in the future, meaning they store oil now to sell later.
Saudi Arabia, the de facto leader of OPEC, has plans to boost exports of oil to 10.6 million barrels per day from May, according to an Energy Ministry spokesman.
Global oil refiners, meanwhile, have cut their throughput because of the slump in demand for transportation fuel, with European refineries slashing output by at least 1.3 million barrels per day, according to Reuters.
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