By Barani Krishnan
Investing.com - Crude prices notched a record weekly gain of as much as 37% on OPEC jawboning and President Donald Trump's tweets that he expected world oil producers to resume production cuts. A drop in the U.S. oil rig count, however, showed that drillers in the country had already begun work to balance a market left incredibly oversupplied by the Covid-19 pandemic.
Trump tweeted on Thursday that he had brokered a deal for Saudi Arabia, Russia and other oil producers to cut between 10 million and 15 million barrels of supply from daily world output. Crude prices rose as much as 25% on Thursday on his tweets, The market added another 12% or so on Friday as OPEC delegates, speaking on conditions of anonymity, tried to keep alive talk of production cuts in a market that had lost more than 60% of its value prior to the rally on estimates that there was an oversupply of some 20 million bpd.
West Texas Intermediate, the New York-traded benchmark for U.S. crude, settled Friday's trade up $3.02, or 12%, at $28.34 per barrel. Just on Monday, WTI hit 18-year lows of $19.27. After the two-day rally, it ended the week up 32%.
Brent, the London-traded global benchmark for crude, settled Friday's trade up $4.717, or 14%, at $34.11 per barrel. Brent rose 37% on the week.
Crude prices were also supported by data showing that U.S. drillers had cut the number of rigs actively pumping oil by 62 this week, the most in a week since 2015. The rig count data was evidence that shale drillers in America, who had contributed to much of the global oil glut, were already paring output even before Trump's intervention this week.
The Kremlin also said President Vladimir Putin was scheduled to meet Russian oil industry executives and officials today to discuss the situation on the world energy markets.
Some analysts and market participants had been wary of Trump’s remarks because there was little evidence to suggest that the Saudis and Russians would be willing to shoulder the bulk of a 10-15 million bpd cut he announced. Such a volume of cuts would account for 5%-7.5% of global output, now standing at around 200 million bpd. Coordinated Saudi-Russian cuts since 2016 under the OPEC+ pact ended unceremoniously early last month, and the two oil titans had been engaged in a production-and-price war in recent weeks.
Asked at a news conference on Thursday on where he got his numbers, Trump implied that his information came from calls placed to Saudi Crown Prince Mohammad bin Salman and Putin, as well as conversations between those two individuals.
But a spokesman for Putin denied that the Russian leader had spoken to the Saudi crown prince since the price war between the two countries began. Saudi oil officials also privately told The Wall Street Journal that Trump had exaggerated the potential cut numbers.
OPEC delegates, however, attempted to lend credibility to the president on Friday, suggesting he wasn’t off the mark.
Bloomberg quoted one OPEC delegate as saying that a global cut of 10 million barrels a day was “a realistic goal”.
"The U.S. needs to contribute from shale oil” to the cuts, Reuters quoted another OPEC source as saying.
Industry regulators in Texas, the largest U.S. oil producing state that churns out some 4 million barrels per day, have indicated they are ready to work with their oil drillers for cuts.
But Trump, who will meet CEOs of some of the biggest oil companies such as ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) at the White House on Friday, said at Thursday’s news conference that he offered no cuts on behalf of American industry — ostensibly due to U.S. antitrust regulations that forbid any coordination of production controls.
White House Economic Adviser Larry Kudrow, who arranged for Trump’s meeting with the oil company CEOs, said in media interviews on Friday: “I think... oil companies, seeing a decline in price are going to pull back on production. That’s just common sense.”
“We don’t dictate oil policies to our oil and gas sectors,” Kudlow added.