NEW YORK (Reuters) – Crude futures surged for a second day on Friday, with benchmark Brent up 10% on hopes that a global deal to cut crude supply worldwide will emerge early next week.
On Thursday, oil staged its largest one-day rally in history on prospects for a cut in supply equivalent to anywhere from 10% to 15% of world demand. The sharp rebound from weeks of losses came after U.S. President Donald Trump said Russia and Saudi Arabia will negotiate to end a price war that slashed prices last month by more than half. Trump said the U.S. has not agreed to cut its output.
The rally continued Friday, with Brent crude LCOc1 futures jumping 9.7%, or $2.87, at $32.81 a barrel by 12:59 p.m. EDT (1659 GMT). Brent soared as much as 47% on Thursday for its highest intraday percentage gain on record. It closed up 21%. The contract is on track to end the week 31% higher.
U.S. West Texas Intermediate (WTI) crude CLc1 rose 6.8%, or $1.74, to $27.06, a day after jumping 24.7%. The contract is up about 25% so far this week, following five consecutive weeks of declines.
OPEC has scheduled a Monday emergency meeting, led by Saudi Arabia, where cuts equal to 10% of world supply – about 10 million barrels per day – could be agreed-upon.
“Grand oil bargain diplomacy clearly shifted into high gear overnight and cuts are likelier than they were until yesterday,” said Robert McNally, president of Rapidan Energy Group in Bethesda, Maryland. “The size of cuts seems to be increasing, and the timing is accelerated.”
Moscow and Washington still have made no firm commitments on output cuts. On Friday, Trump and Russian President Vladimir Putin were to meet with top producers.U.S. law forbids producers from cooperating to cut output.
Even a monumental cut in world output would not reduce a glut by much due to slumping demand during the worsening coronavirus pandemic, which has already sickened more than a million people worldwide.
The head of the International Energy Agency, Fatih Birol, said that even if OPEC+ cut supply by 10 million bpd, global oil stocks would build by 15 million bpd in the second quarter.
Trump said on Thursday he had spoken with both Putin and Saudi Crown Prince Mohammed bin Salman and they had agreed to reduce supplies by 10 million to 15 million barrels per day (bpd) out of total global supply of about 100 million bpd.
“It does appear that momentum is growing for some form of output agreement,” said analyst Harlan Matthews at Redburn Energy.
“(But) there are huge obstacles to any output agreement on this scale, and even if it were to be implemented the market would remain chronically oversupplied in the near term.”
The Canadian province of Alberta, home to the world’s third-largest oil reserves, is open to joining any potential global pact to reduce a glut of crude.
By cutting output by 10 million bpd, “the oil industry would get at least three weeks more room to prepare for hitting the wall when there are no more places to put the excess production,” said Rystad Energy’s Per Magnus Nysveen.
Additional reporting by Shadia Nasralla, Shu Zhang and Sonali Paul; Editing by Kirsten Donovan/David Goodman/Susan Fenton/David Gregorio