Oil prices rose on the second day today in accordance with the hopes that US producers would cut production. However, the gains are limited by the growing suspicion of coronavirus that continues to spread globally.
In addition to the impact of the coronavirus, the conflict between Saudi Arabia and Russia on Monday caused a 25% drop in raw prices, triggering panic sales in Wall Street and other stock markets.
Brent crude futures increased by $ 1.26 or 3.4% to $ 38.48 per barrel until 0418 GMT, while West Texas Intermediate (WTI) crude increased by $ 0.91 or 2.7% to $ 35.27.
Oil oligargs and titans in Saudi Arabia and Russia compensated for almost half of Monday’s 25% loss triggered by conflict. Expectations about US shale producers cutting production have increased the market’s sensitivity. US shale oil producers say they have deepened spending cuts, which could reduce production.
Oil and stock markets had a solid recovery Tuesday after Monday’s chaos led by the world’s largest economies to alleviate the economic impact of the coranavirus outbreak.
Recovery in crude oil is not expected to take a long time. However, while the Saudi and Russian market share war performed, both sides are confident in increasing and managing the production by their end. Saudi Arabia says it will raise its oil supply to record levels in April, not hesitate to face it, and will reject Russia’s future offers for new talks on production levels.
Russian Energy Minister Alexander Novak said Moscow is ready to discuss new measures with OPEC, calling Russian oil companies and Opec for a meeting Wednesday to discuss future cooperation. Therefore Brent oil prices rose 8% on Tuesday, above $ 37 a barrel. However, Saudi Energy Minister Prince Abdulaziz bin Salman rejected the proposal.
Saudi Arabia needs an oil price of about $ 80 to balance its budget, but stays calm and thanking to its cash reserves that let the ability to borrow to deal with a price drop for now. Russia needs about $ 42 to balance its financial accounts and has cash reserves that it can use in the same way.
Iraq and other OPEC countries, which have poorer financial resources to deal with a dramatic drop in oil revenues, are calling for action to raise prices.
The US Energy Department said on Tuesday that the government has suspended up to 12 million barrels of oil from the emergency crude reserve due to the price drop.
Trump wants re-election this year and likes to have the benefit from the low prices reflected on the pump. However, the US government knows that it has to deal with the potential for bankruptcy in the US shale oil industry, which plays an increasingly important economic role.