Crude oil prices rallied on Tuesday amid hopes the White House will stimulate the economy to soften the impact of the coronavirus and that Saudi Arabia and Russia will resolve their differences over oil production.
One day after Brent crude plummeted 24%, the global benchmark rallied 8.3% to $37.22 a barrel, posting its best day since September. West Texas Intermediate crude for April delivery surged 9.3% to $34.02.
Monday’s price collapse came after Saudi Arabia cut its export prices for crude in a move many saw directed at Russia’s refusal to back OPEC’s plan to reduce production to offset the collapse in demand from the coronavirus outbreak.
But state-run Saudi Arabian Oil, known as Aramco, said Tuesday it would boost production to 12.3 million barrels a day in April, while Russia’s energy minister said Moscow hadn’t closed the door to cooperation with OPEC.
The Saudi move is “making people believe the Russians will come back to the table,” Jamie Webster, senior director at the Boston Consulting Group’s Center for Energy Impact, told The Wall Street Journal. “There are three ways to solve this and only one of them is quick, and that’s OPEC+ [group of oil-producing countries] is coming back to the table.”
According to MarketWatch, the oil market also got a boost Tuesday from President Donald Trump’s statement that the White House and Congress would meet to consider “very substantial” economic relief measures to combat the coronavirus.
“In times of turmoil, nothing is more important in restoring confidence than the government appearing calm and in control of the situation, how tenuous that control maybe,” Jeffrey Halley, senior market analyst at broker OANDA, in a note, said in a client note.
Monday’s price collapse was the worst since the Gulf War in 1991. Luke Sadrian, co-chief investment officer at hedge fund Commodities World Capital, said oil prices will ultimately have to rise because major energy producers in the U.S. shale patch cannot make money at the levels reached on Monday, but some investors believe Tuesday’s rebound will be short-lived.