By Barani Krishnan
With nine-tenths of the world economy suppressed by coronavirus, crude edged toward its worst quarter in history as demand destruction from the pandemic and OPEC’s virtual collapse created a perfect storm for oil. But Russia is keeping the door open for a pact with U.S. drillers.
As trading for March neared its close, West Texas Intermediate, the benchmark for U.S. crude, was down 55% for the month and 67% for the first quarter. Brent, the global benchmark was off 48% for March and 61% for the quarter. For both month and quarter, they were the biggest losses ever for WTI and Brent.
But for Tuesday itself, crude prices rose on hopes that the Kremlin and the White House might be able to strike a deal in place of OPEC’s virtual collapse after a phone conversation between presidents Vladimir Putin and Donald Trump to try and strike a new production pact. Separately, Texas, the largest U.S. oil producing state, is mulling production quotas on drillers not imposed since the 1970s.
New York-traded WTI was up 52 cents, or 2.6%, at $20.61 per barrel by 1:35 PM ET (17:35 GMT). It earlier hit an 18-year low of $19.27.
London-traded Brent rose 3 cents, or 0.1%, to $26.45.
But analysts remained skeptical about the prospects of Putin agreeing to a new production pact while the Saudis remain determined to grow their output by a whopping 30% to 12.3 million barrels per day by end-April to wrest as much market share as possible from both Russian and U.S. competitors.
“According to reports, Trump and Putin, in the call, agreed on the importance of stability in global energy markets. Sounds nice, but what does that mean?” said Phil Flynn at Price Futures Group in Chicago.
Goldman Sachs (NYSE:GS) has estimated that crude demand for this week will fall by 26 million barrels per day or 25% below norm as 92% of the world economy remains in lockdown.
In a gloomier outlook for the U.S. economy, the Wall Street forecaster recast its second-quarter real GDP forecast to an annualized drop of 34% versus a previous negative 24% reading.
