Oil surges again as Opec and allies prepare for urgent meeting on Monday

LONDON (BLOOMBERG, REUTERS) - Oil advanced back above USUS$31 a barrel in London on Friday (April 3), reversing earlier declines, as Opec+ scheduled an urgent meeting next week after a historic slump in prices that has crippled the energy sector.

The coalition will hold a meeting by video conference on Monday, though it's still not clear who will attend, according to delegates. News of the plan came just hours after US President Donald Trump said he expected global producers including Saudi Arabia and Russia to cut more than 10 million barrels of production, triggering the biggest ever jump in prices on Thursday.

Futures had been trading lower earlier in the day on Friday on growing doubts over Trump's claim, with Citigroup and Goldman Sachs Group saying any supply deal would anyway be too little, too late as demand craters due to efforts to stem the coronavirus.

But the market is interpreting next week's meeting as a step closer to some sort of deal that could help address the collapse in prices.

Brent for June settlement climbed US$1.54, or 5.1 per cent, to US$31.48 a barrel on the ICE Futures Europe exchange as of 8:43am in London after falling as much as 5.6 per cent earlier. West Texas Intermediate for May delivery rose 0.8 per cent to US$25.52 on the New York Mercantile Exchange after declining as much as 7.1 per cent earlier.

The virtual meeting will be open to all producers, not just those that are part of the Opec+ alliance, according to the delegates. Opec+ is a group of 24 oil-producing nations, made up of the 14 members of the Organization of Petroleum Exporting Countries, and 10 other non-OPEC members, including Russia.

While Trump tweeted Thursday that he had spoken to Saudi Crown Prince Mohammed bin Salman, who had in turn spoken with Russian president, a person familiar with the situation said the US president's goal is purely aspirational and will ultimately hinge on whether Riyadh and Moscow can reach a deal.

"Even if there is an agreement to curtail 10 million barrels a day of output, the fundamentals show demand destruction and inventory builds," said John Driscoll, chief strategist for JTD Energy Services Pte in Singapore. The "anxiety and mayhem out there is reminiscent of the financial crisis," he added.

The outlook for the physical market remains bleak as discounts for some grades of physically delivered oil across the US and Canada widened. Heavy Louisiana Sweet crude lost US$1.75 a barrel relative to West Texas Intermediate to a record US$10.50 discount.

Texas Railroad Commission Ryan Sitton, in a rare move for the state's oil regulator, tweeted on Thursday that he spoke with Russian Energy Minister Alexander Novak and discussed a 10-million barrel a day global output cut and would talk to the Saudi oil minister soon. Trump is scheduled to meet with US oil company executives Friday as the administration seeks ways to help the beleaguered industry.

Global oil demand is expected to fall by about 30 million bpd in April, or about one-third of daily consumption. Some three billion people around the world have been put on lockdown to slow the spread of coronavirus, which has sickened 1 million people worldwide and killed nearly 50,000.

The immense decline in demand sent oil prices to their lowest levels since 2002, close to US$20 per barrel, hitting budgets of oil-producing nations and dealing a huge blow to the US shale oil industry, which cannot compete at low prices.