Oil Surges Record 24% After Trump Claims Saudis Will Cut Production

Oil rallied more than 24% after President Trump talked up the prospect of a truce in the ongoing oil price war between Russia and Saudi Arabia that has devastated the oil market amid a major demand slump caused by the coronavirus, tweeting that he had spoken with Crown Prince of Saudi Arabia Mohammed Bin Salman and expects Saudi Arabia to cut production by 10 million barrels.

Last month, an all-out price war between two oil-producing giants, Russia and Saudi Arabia, rocked global markets just as demand began to plummet during the coronavirus outbreak. When members of OPEC, a cartel of 13 of the world’s major oil-producing countries, and Russia met in Vienna to discuss industry-wide supply cuts aimed at alleviating the dramatic drop in demand, Russia did not agree to the cuts, leading to speculation that it acted intentionally in order to drive prices down, gain market share and punish the growing American fracking industry; others dispute that theory. In response, Saudi Arabia’s state-owned oil company, Saudi Aramco, announced that it would ramp up production to more than 10 million barrels a day in April and slash its prices in order to undercut Russia and other competitors. Markets took a major hit, with prices plummeting by more than 30% at one point to lows not seen since the Gulf War in the 1990s.

One unexpected consequence of the twin supply and demand shocks? Storage. As production ramps up and demand continues to plummet, the world is running out of places to put oil.