Saudi Arabia, Russia to cut crude production says Trump; oil prices bloom

The sun shined over oil prices on Thursday after US President Donald Trump said top oil exporters Saudi Arabia and Russia have agreed to slash crude production substantially, which was followed by the Saudis calling for an urgent OPEC+ meeting. International benchmark Brent Crude shot up nearly 22% within half an hour of Trump’s revelation, which was made over Twitter.

Brent crude soared to over $32 a barrel following Trump's tweet, before easing to $29. American benchmark West Texas Intermediate (WTI) shot up to $27 (+25%) a barrel before falling back to $24.

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Trump's relieving tweet

President Donald Trump in a tweet said that he spoke to Saudi Arabia's Crown Prince Mohammad bin Salman, who earlier spoke to Russian President Vladimir Putin, and he expects that the two petroleum powerhouses will cut back crude production by "approximately 10 million barrels". He touted this as a "great" thing for the US oil and gas industry. The US has emerged as the world's top oil producer and has turned into a net exporter.

Oil under stress

International crude oil prices have been suffering due to a demand plunge caused by the coronavirus pandemic which has put nearly a third of mankind under lockdown and shattered economic activities. Also contributing to the fall is a supply glut in the oil market after OPEC's de facto leader Saudi Arabia waged a price war with non-OPEC Russia following the collapse of a production cut deal earlier in March.

The market is flooded with oil right now, with little signs of demand picking up. Oil importers like India have been benefitting with this slump as the nation saves billions of dollars in import bill monthly.

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Saudi ready for OPEC+ meet

Following Donald Trump's tweet, Saudi Arabia confirmed that the country will call an urgent meeting of the OPEC+ (OPEC plus other producers like Russia) "with an aim to retrieve balance to oil markets". OPEC is a club of 14 oil-producers that includes countries like Iran, Iraq, Venezuela, among others.

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