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April 7, 2020

Oil prices rise with hopes of new agreement for production cuts

Oil prices have risen with hopes Saudi Arabia and Russia will agree a deal to cut output, as the Covid-19 pandemic keeps demand low.

By Himaja Ganta

Oil prices have risen with hopes Saudi Arabia and Russia will agree a deal to cut output, as the Covid-19 pandemic keeps demand low.

According to Reuters, Brent crude futures rose by $0.80, to $33.85 a barrel at 0657 UTC. In the previous trading day, the value slipped to over 3%.

Meanwhile, US crude CLc1 was up by $0.83, at $27.33 per barrel. This followed an earlier session drop of 8%.

The news agency cited unnamed sources as saying Saudi Arabia and Russia are likely to enter into a production cuts deal at Thursday’s meeting. However, the meeting depends on the US doing its share.

Stratfor global energy and Middle East director Greg Priddy was quoted by Reuters as saying: “Anything less than a coordinated global cut is going to be disappointing to the market, as further price declines will be necessary to shut in enough output.”

Meanwhile, US President Donald Trump said OPEC had not approached him to push domestic oil producers for production cuts to support prices. He added that US output was declining in response to the collapse in oil prices.

In a press briefing, Trump said: “I think it’s happening automatically but nobody’s asked me that question yet so we’ll see what happens.”

According to the latest survey by Reuters, a global recession would likely be more serious than expected due to Covid-19 pandemic. Because of this, big production cuts will likely be needed.

Capital Economics said in a note: “We expect energy prices to hover around current levels until economic activity recovers.”

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