Oil Up as Texas Supports Trump-Led Output Proposal | Rigzone
(Bloomberg) — Oil kept rising after a record surge as President Donald Trump waded into the price war between Saudi Arabia and Russia, while a Texas regulator proposed his state coordinate output cuts with the feuding producers.
Futures in New York increased as much as 9% following the biggest ever daily gain Thursday, rebounding from the lowest close since 2002. Oil has been whipsawed this week as investors weigh further stimulus measures to combat the impact of the coronavirus pandemic against collapsing demand and an impending supply flood from the world’s biggest crude producers.
Trump said he could intervene in the price war between Saudi Arabia and Russia, and that he was searching for “medium ground” to break the deadlock as he faces calls from lawmakers to help the domestic oil industry. A Texas Railroad Commissioner proposed joining the two countries in cutting 10% of crude output to stabilize the market.
Oil has clawed back some losses even as traders brace for the market rout to continue below $20 a barrel, according to a Bloomberg survey. While Saudi Aramco said it will cut domestic refining to free up more crude for export, analysts at MUFG Bank Ltd. said the price war is a “lose-lose strategy” for the kingdom and Russia, with the fiscal and revenue outlook for both countries challenging if crude holds below $40 for a protracted period.
“With other governments manipulating oil markets, it’s fair to ask: Why shouldn’t our government step in to try to reinstate a more market-based approach?” Ryan Sitton, one of three voting members of the Texas Railroad Commission, said in a Bloomberg Opinion column. “It would stave off a total oil industry meltdown.”
Saudi Arabia has ordered state-run Aramco to keep output at a record 12.3 million barrels a day over the coming months, but in a surprise move, both the kingdom and Iraq cut the rebates on freight costs they give to customers, effectively lifting prices for some buyers in Europe and the U.S.
West Texas Intermediate for April delivery, which expires Friday, rose as much as $2.27 to $27.49 a barrel on the New York Mercantile Exchange, trimming a fourth weekly loss. The more-active May contract added 8.2% to $28.03 as of 8:26 a.m. in London.
Brent crude for May increased $1.73, or 6.1%, to $30.20 a barrel on the ICE Futures Europe exchange after advancing 14% on Thursday.
Trump said he would take action in the oil dispute at the “appropriate time,” adding that low prices are currently akin to a tax cut for American consumers. As a support measure for U.S. drillers, the administration plans to initially purchase 30 million barrels for the Strategic Petroleum Reserve in May and June, and buy as much as 77 million barrels of oil in total over time.
Texas’s main oil regulator is weighing for the first time in nearly half a century whether the state should cut crude output, a move that would have an enormous business and political impact. Sitton proposed a plan in which Texas, the world’s third-largest oil producer, to join the two oil superpowers to curb supply, asking for federal support to negotiate with the other countries.
The American shale industry has found itself caught in the middle of a fight over market share between Saudi Arabia and Russia. The sector has so far scaled back operations and is also threatened with a wave of bankruptcies.
–With assistance from Dan Murtaugh.
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Ben Sharples, Dan Murtaugh