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.
“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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