Oil climbs as traders pin hopes on output reduction

Oil prices rebounded after two consecutive days of decline, as traders hoped for an agreement later this week between Saudi Arabia and Russia that would limit production and support the market.

Crude oil Brent, the international benchmark for oil, rose 2.4% to $ 32.63 per barrel in Asia on Wednesday. It fell more than 6% on Monday and Tuesday combined, after a sharp rebound late last week.

G20 oil ministers are expected to meet on Friday to try to find measures to support global industry. Before that, Saudi Arabia and Russia are expected to meet on Thursday to discuss a production feud that has swamped global supply markets and cut oil prices in half this year.

“We are obviously ready for the next few days with very high expectations,” said Robert Rennie, global market strategy manager at Westpac.

The G20 meeting would be the first time that ministers have met specifically to deal with energy issues, highlighting the deep unease caused by the oil crash.

On Friday, US President Donald Trump called on Russia and Saudi Arabia to cut oil production by at least 10 million barrels a day to put a floor below prices. Demand for crude oil has been severely affected by the surge in coronaviruses which is stopping economic activity around the world.

“The market is very concerned about the physical storage capacity, and even if we see agreements within Opec, they may not be real agreements,” said Mr. Rennie. “We have to see real production withdrawn from the market from a global perspective.”

The gains for oil came as a two-day rally in Asian stocks waned as most markets after Wall Street fell after a wave of optimism earlier this week.

The Hang Seng index in Hong Kong lost 1% while the Chinese CSI 300 fell 0.5%, although the Topix index in Japan gained 0.5%.

Investors had pushed stocks higher at the start of the week in response to signs of a slowdown in the coronavirus pandemic in the hardest-hit countries, especially Europe. However, questions remain about how quickly strict quarantine measures can be lifted, and concerns about the economic impact.

The S&P 500 closed down 0.2% overnight after giving up its initial gains, while the Dow Jones Industrial Average and the Nasdaq Composite each fell by a similar amount.

Gold prices rose 0.1% to $ 1,649.35 an ounce as uncertainty resurfaced in the market after reaching its highest level in nearly a month on Tuesday.

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