Oil rallies 10% after Trump says he expects Saudi Arabia-Russia feud to end soon

A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.

Dado Galdieri | Bloomberg | Getty Images

Oil prices rallied on Thursday after President Donald Trump talked up the possibility of Saudi Arabia and Russia ending a price war that contributed to crude’s massive plunge.

West Texas Intermediate futures surged by $2.11, or 10.4%, to $22.42 per barrel. International benchmark Brent jumped 10.4%, or $2.58, to $27.32 per barrel.

“Worldwide, the oil industry has been ravaged,” Trump told reporters Wednesday evening. “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.”

Trump added he expects both countries to end their price war within a “few days.” Trump made his remarks ahead of a meeting with energy industry executives scheduled for Friday.

“Who has the biggest problem? Saudi, and Russia. Saudi above all,” Mizuho analyst Paul Sankey said in a note to clients. “Their burn rate in this market will use up their $500bn reserve pile within two years.”

OPEC countries led by Saudi Arabia proposed last month a production cut of 1.5 million barrels per day as demand waned. However, non-OPEC producer Russia rejected the cut, sparking a price war between the two oil giants, leading to the collapse in the price of crude.

On March 6, U.S. crude was trading above $41 per barrel. Since then, crude has lost about half of its value.

“Saudi Arabia is fulfilling its pledge of raising oil exports following the collapse of the OPEC+ agreement with Russia,” Neil Beveridge of AB Bernstein said in a note. “We expect unprecedented levels of stock builds in 2Q20 which could test the limits of both onshore and floating crude capacity.”

Crude also got a boost Thursday after Bloomberg News reported — citing people with knowledge of the matter — that China will start buying oil for its emergency reserves.

—CNBC’s Michael Bloom contributed to this report.

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