Crude oil futures soared 10% on Tuesday morning after the most significant decline since the 1991 Gulf War on Monday, after Saudi Arabia slashed export prices of oil over the weekend in retaliation to Russia walking away from a production cut agreement at OPEC's meeting in Vienna, Austria, on Friday.
Oil futures started the rebound on Monday evening when President Trump said his administration would discuss a possible payroll tax cut with the US Senate, saying they would seek "very very substantial relief" for the economy that has been roiled by the outbreak of Covid-19.
Oil pared some gains around 0635ET on Tuesday when Saudi Aramco CEO Amin Nasser said Saudi Arabia was prepared to boost its output by more than 20%, and supply 12.3 million barrels per day (bpd) in April, above the current production levels of 9.7 million bpd. Nasser told Reuters in an emailed statement that April's crude supply will be "300,000 barrels per day over the company's maximum sustained capacity of 12 million bpd."
Speaking on Tuesday, Russian oil minister Alexander Novak said that Moscow has yet to rule out measures with OPEC to stabilize the oil market, adding that the next OPEC+ meeting was scheduled for May-June. However, Saudi Arabia's energy minister told Reuters that there was no need for OPEC+ to hold a meeting in May-June timeframe if there was no understanding with Russia on production cuts to stabilize oil markets amid plunging demand in China.
"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 bin Salman said.
Separately, Russia's Energy Minister Novak said Russian companies may boost oil output by up to 300k BPD and has potential to increase by 500k BPD; adding that after the initial reaction, markets are now more balanced. And while there were some reports that the next OPEC+ meeting would be planned for May/June, subsequently, Saudi Energy Ministry state they do not see the point in holding such a meeting only to demonstrate failures in dealing with ongoing crisis.
RBC's latest commodity note said, "Price wars and pandemics are nothing new to the commodity markets, but both occurring simultaneously is something we have yet to witness in our careers. The note added, "Such action will test the market's self-balancing mechanism absent the backstop of OPEC, a mechanism that has not been tested since the US shale boom was in its infancy."
While Novak hints at further talks with the Saudis, yesterday we reproted that Moscow said it could weather oil prices of $25 to $30 per barrel for between six and ten years.