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Oil climbs amid hopes of production deal between Russia and Saudi Arabia

Edmund Heaphy
Finance and news reporter
The sun sets behind an oil production pump. (Getty)

Oil prices looked set to snap a two-day losing streak on Wednesday as traders hoped that an agreement between Saudi Arabia and Russia could reduce global output by 10 million barrels per day.

Crude oil (CL=F) was trading 3% higher at $24.34 per barrel. Brent (BZ=F) rose by 0.19% to $31.93.

In comments on Fox News, US president Donald Trump said once again that he expects the two countries to resolve the price war.

“I think it’s all going to work out,” Trump said, noting that he had spoken to Russian president Vladimir Putin and Saudi Arabia’s Crown Prince Mohammed bin Salman about low oil prices.

Investors now expect significant progress when members of OPEC, which consists of 14 of the world’s major oil-exporting nations, and allied producers meet on Thursday.

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The price war and a major coronavirus-related fall-off in oil demand has seen prices plunge in recent weeks.

Demand for global oil has dropped by as much as 30%, or about 30 million barrels per day, since the crisis began.

Oil prices declined on Tuesday after the US energy department said that output was declining without government intervention, indicating that the country would not reconsider its refusal to intervene in oil markets.

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While members of OPEC have indicated that they are willing to broker a detente, they have thus far insisted that the US and Canada must play a role in curbing output. Recent comments from Trump had suggested the US was willing to participate.

“Investors are wary if the US is going to join the production cut tomorrow, and this is what haunting traders now,” said Naeem Aslam, the chief market analyst at Avatrade.

“Remember, the initial actions of Donald Trump gave the markets the perception that this time the US will join the production cut as well,” he said.

“What we need here is a strong message, and that is ‘whatever it takes’. If the US joins the OPEC+ in the production cut, the message will be strong for the industry.”