Oil pipeline and pumping unit of the silhouette. Image source: Wang Aizhong © 123RF.com
Investors finished last week’s trading session on a high note, expecting a quick resolution to the ongoing oil price war, which devastated the energy market already reeling from the coronavirus pandemic.
It was hoped that an OPEC+ videoconference would be held on Monday, allowing Riyadh and Moscow to reach a mutually satisfying agreement that would calm the jolted energy market.
The world’s two biggest oil exporters have reached a deadlock in negotiating the appropriate cuts in production, and the situation has continued to escalate as Saudi Arabia and Russia bolstered their production capacities.
As a result of that, the market is currently oversupplied with cheap oil, at a time when global demand is subdued due to the ongoing pandemic.
General market optimism was reinstated on Thursday when Donald Trump unexpectedly claimed that he has helped the Crown Prince of Saudi Arabia Mohammad bin Salman and the Russian President Vladimir Putin agree to renew strategic discussions of output reductions.
Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!
— Donald J. Trump (@realDonaldTrump) April 2, 2020
Trump’s tweet came after he had recently pledged to intervene in the situation and act as a mediator between the two sides. He made the announcement shortly after the release of the gloomiest NFP report (read about it below) in decades, which cushioned the negative impact on the market from the massive surge in unemployment.
Investors' hopes for a quick solution; however, could be promptly dismissed as a new rift between the two opposing sides seems to be endangering the anticipated talks. According to Bloomberg, the on and off shifting of blame between Moscow and Riyadh threatens to jeopardise Trump’s attempts to broker a deal.
“In a statement early on Saturday, the Saudi Foreign Minister Prince Faisal bin Farhan said comments by Putin laying blame on Riyadh for the end of the OPEC+ pact between the two countries in March were “fully devoid of truth. […] “Russia was the one that refused the agreement” in early March, the Saudi foreign ministry said. “The kingdom and 22 other countries were trying to persuade Russia to make further cuts and extend the agreement.”
If the general diplomatic tone continues to deteriorate and the trade talks are postponed or cancelled altogether, a new selloff could follow the 33 per cent crude oil rally from the end of last week.
The price of crude oil is currently consolidating just below the historic support (presently resistance) level at 29.00.
Crude Oil 1H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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