Is there a respite from oil trouble?

A successful meeting is being expected on April 9 between the members of Organisation of Petroleum Exporting Countries (OPEC) and allied producers including Russia. On the back of this, crude prices oil prices saw a positive jump as US West Texas Intermediate (WTI) crude oil price rose by 5.59 per cent to USD 24.95 per barrel and Brent crude oil price went up by 2.35 per cent to USD 32.62 per barrel.

At the beginning of this week, WTI Crude dropped by 8.67 per cent and Brent crude witnessed a fall of 3.21 per cent as the virtual meeting which was scheduled to be held on Monday, had been postponed further. The first quarter of 2020 saw a slump in crude oil prices as the supply exceeded demand. Coronavirus outbreak pulled out the demand for oil with a global slowdown in manufacture and trade. Despite this, the battle between Russia and Saudi Arabia in order to gain the largest market share for oil production continued bringing an excessive supply of oil, leading crude prices to plummet. American Petroleum Institute (API) estimated a huge crude oil inventory build which has led to a drop in oil production by US companies without any government intervention. With the swelling crude supplies and weak furl demand, any further drop in crude prices would have been expected to threaten heavily leveraged US oil companies with bankruptcy or layoffs.

The meeting that is set to be held between the oil producers on Thursday is expected to bring at least some respite to crude prices as US President Donald Trump said that he expects Saudi Arabia and Russia to take an output cut of around 10 to 15 million barrels per day from the global markets. According to reports, Republican US Senators have introduced a bill, which will allow US to remove defence systems and troops in Saudi Arabia unless & until, it cuts oil output. Using this as leverage, the output of crude oil is expected to slow down thus, gaining a control over the fluctuation of crude prices.