Oil spikes on Trump tweet, hopes of production cuts
Oil prices surged, setting off a rally in shares of energy companies, after President Donald Trump said Thursday he expected that Saudi Arabia and Russia would cut their oil production substantially to halt the collapse of prices.
Trump said in a tweet that he spoke with Saudi Crown Prince Mohammed bin Salman, who had spoken with President Vladimir Putin of Russia. “I expect & hope that they will be cutting back approximately 10 million barrels,” Trump said.
That figure represents about 10% of normal world consumption. The president later said the cut could be as much as 15 million barrels.
Saudi Arabia called Thursday for an urgent meeting of OPEC and other oilproducing countries with the “aim of reaching a fair agreement to restore” balance in the oil markets. The Saudis said in a statement that they were acting to support the global economy and in “appreciation” of Trump’s request.
The Kremlin denied that Putin had spoken to the Saudi crown prince, as Trump had said in his Twitter message.
“No, there was no conversation,” Dmitry Peskov, a spokesman for Putin, told the Interfax news agency.
Still, crude oil futures, which had been climbing Thursday, surged and shares of oil and gas companies rallied.
West Texas Intermediate, the U.S. crude bench mark, rose about 25%, and Occidental Petroleum was the best performing stock in the S&P 500, with a gain of about 19%. Apache rose nearly 17%, and Hallibur
ton gained more than 13%.
The rally bolstered the U.S. stock market, with the S&P 500 ending the day up more than 2%.
Oil prices had been hammered as the coronavirus pandemic all but eliminated travel and cut demand for energy. A price war that broke out between Saudi Arabia and Russia last month intensified the decline. After the countries failed to reach a deal on production cuts, both instead increased output to gain market share.
The combination of slumping demand and the contest between two of the world’s largest oil producers had pushed crude oil prices down by 55% in March alone, wreaking havoc on the energy industry, with oil companies slashing budgets, and refineries cutting production of gasoline, diesel and jet fuel.
The possibility of some relief to the industry was also welcomed by stock investors looking for some good news. Earlier on Thursday, a report on jobless claims showed that 6.6 million people filed for unemployment benefits last week in the latest sign of the economic damage wrought across the country by the pandemic.
Businesses dependent on consumer spending were battered as a result. Retailers ranging from Gap to Walgreens Boots Alliance fell. Live Nation Entertainment, which produces concerts and sells tickets to events, was one of the worst-performing stocks in the S&P 500, after falling about 13%. Kohl’s fell about 10%.
The Labor Department’s report Thursday that 6.6 million Americans filed claims for unemployment benefits last week only increases the pressure on Trump and members of Congress to ready another package to further aid workers and businesses through the coronavirus crisis.
The $2.2 trillion package that Trump signed into law last week includes enhanced benefits for unemployed workers for up to four months, along with aid for large and small businesses and direct payments to millions of individuals, as the country struggles through a shutdown of economic activity meant to slow the spread of the virus.
Many economists have warned that the $350 billion included in that most recent package for aid to small businesses will not prove sufficient to help all of the companies that might otherwise go under during the shutdowns.
R. Glenn Hubbard, a Columbia University economist and former adviser to President George W. Bush, said the necessary assistance was likely to be “closer to $1 trillion,” which would require an additional $650 billion appropriation from Congress.
Democrats, including House Speaker Nancy Pelosi, D-Calif., have pushed for additional payments to reach more Americans, to help people continue to pay their bills through the crisis. Sen. Sherrod Brown, D-Ohio, has called for federally funded “hazard pay” for doctors, nurses, grocery store clerks, postal carriers and other workers on the frontlines of the virus.
Trump and Democratic leaders have called for a sweeping investment in infrastructure, such as broadband expansion and bridge repair, that could put millions of Americans to work once the crisis abates.