Oil Prices Spike 25% overnight

03-Apr-20

Oil prices spiked 25 percent on Thursday after President Trump tweeted that Saudi Arabia and Russia would cut production by 10 to 15 million barrels per day (mb/d)

A 10-15 mb/d cut is incredibly massive. Russia and Saudi Arabia are both at around 11 mb/d; would they both cut their output in half? That sounds improbable

Russia immediately shot down the idea that there was some agreement. That was followed by a clarification from Saudi Arabia, which called for an emergency OPEC+ meeting that could lead to cuts with “another group of countries” in an attempt to arrive at a “fair solution.”

That statement means that Saudi Arabia would only cut if a lot of other countries did the same.

Then, news surfaced that Saudi Arabia was willing to cut output below 9 mb/d if others joined them. That means that Saudi will chip in around 2 mb/d of cuts, which is incredibly modest compared to what Trump’s tweet suggests.

It would also bring Saudi output roughly back to where it was a month ago, prior to the breakdown of the OPEC+ negotiations.

Source: Oil Price