Picture: 123RF/PAN DENIM
Picture: 123RF/PAN DENIM

London — Oil prices firmed on Tuesday after US President Donald Trump and Russian President Vladimir Putin agreed to talks aimed at stabilising energy markets, with benchmarks climbing off 18-year lows hit as the coronavirus pandemic cut fuel demand worldwide.

Brent crude was up by 61c, or 2.7%, at $23.37 a barrel by 8.33am GMT, after closing on Monday at $22.76, its lowest finish since November 2002. US crude was up by $1.04, or 5.2%, at $21.13 a barrel, after settling in the previous session at $20.09, its lowest since February 2002.

Oil markets have faced a double whammy from the coronavirus outbreak and a race to win market share between Saudi Arabia and Russia after oil cartel Opec and other producers failed to agree on deeper cuts to support oil prices in early March.

Oil prices firmed amid reports that the US and Russia are looking to co-operate on stabilising energy prices. Business Day spoke to Craig Erlam, senior market analyst at Oanda, about the development.

Trump and Putin agreed during a phone call to have their top energy officials discuss stabilising oil markets, the Kremlin said on Monday.

Though the futures market is seeing a recovery, physical cargoes are selling in some regions at single digits, with sellers offering hefty discounts.

“The gap between physical assessments and futures reflects the differences between the realities on the ground and speculation about efforts to ease that pressure,” JBC Energy said.

With a plunge in prices that has knocked about 60% off oil prices this year, a commissioner with the Texas state energy regulator renewed a call for restrictions on crude production because of the national supply glut.

In a sign of how well the market is supplied, the front-month Brent futures contract for May is trading at a discount of $13.95 a barrel to the November contract, the widest contango spread ever seen. A contango market implies traders expect oil to be higher in the future, encouraging them to store oil now to sell later.

Saudi Arabia, de facto leader of Opc, plans to boost its oil exports to 10.6-million barrels per day (bpd) from May on lower domestic consumption, a Saudi energy ministry official said.

Global oil refiners, meanwhile, have cut their throughput because of the slump in demand for transportation fuel, with European refineries slashing output by at least 1.3-million bpd, sources told Reuters.

ExxonMobil closed a small crude distillation unit at its 502,500 bpd Baton Rouge refinery in Louisiana due to low demand, sources said.

Chief economist for global commodities trader Trafigura said oil demand could fall in the coming weeks by as much as 30% from consumption at the end of last year.