By Barani Krishnan
Investing.com - Oil prices clawed back some of the losses from Monday’s epic drop as Wall Street put in a modest rebound as well on the Trump administration’s pledge to cut taxes and provide other stimulus as a balm for those affected by Covid-19.
But signs that Saudi Arabia will raise its crude supply to a record high in April as it ratchets up a price war and fight for market share with Russia kept traders on the edge.
Amin Nasser, CEO of Saudi Aramco (SE:2222) said the oil giant would increase supply to 12.3 million barrels per day (bpd) in April for customers inside the kingdom and abroad. That's 300,000 bpd above its maximum production capacity, indicating Aramco may also free up crude from storage, Reuters reported.
Russian oil companies plan to boost output by up to 300,000 bpd, with the country's oil producers having the potential to increase output by 500,000 bpd, Energy Minister Alexander Novak said.
West Texas Intermediate, the New York-traded benchmark for U.S. crude prices, was up $2.11, or 6.7%, at $32.24 per barrel by 12:03 PM ET (16:03 GMT). WTI fell 25% on Monday, its biggest one-day slump in nearly 30 years, on the Saudi-Russia standoff that also took U.S. crude briefly to a four-year low of $27.34.
Brent, the London-traded global benchmark for crude, rose $2.08, or 6.1%, to $36.44. Brent also lost about 25% on Monday, touching a 2016 low of $31.02.
Tuesday’s rise in oil prices was helped partly by an early rebound on Wall Street, which also recovered from a historic loss on the Dow the previous day, as President Donald Trump proposed a payroll tax cut to mitigate the economic fallout to the United States from the coronavirus.
Republican senators aligned to Trump were set to be briefed by the White House at a lunch meeting on Tuesday on the payroll tax cut. But at least one major political supporter of Trump — Senate Majority Leader Mitch McConnell — seems reluctant to support the cut, the Washington Post reported.
Also calming the oil market somewhat on Tuesday was a White House statement that Trump had spoken with Saudi Arabia's Crown Prince Mohammed bin Salman in a call on Monday to discuss global energy markets.
Trump’s call with the crown prince came after Treasury Secretary Steven Mnuchin told Russia's ambassador to the United States on Monday that energy markets needed to stay "orderly" amid rising concerns that extra oversupply of oil from the Saudi-Russian faceoff could trigger bankruptcies among higher-cost U.S. shale oil producers.
Novak has called a meeting with Russian oil companies on Wednesday to discuss the possibility of future cooperation with OPEC, two sources told Reuters.
But Saudi Arabia’s energy minister Prince Abdulaziz bin Salman rebuffed any immediate ideas for peace.
"I fail to see the wisdom for holding meetings in May-June that would only demonstrate our failure in attending to what we should have done in a crisis like this and taking the necessary measures,” Prince Abdulaziz told Reuters.