Saudi Arabia-Russia dispute in focus

U.S crude oil prices edged higher on Friday, extending gains after a 24% jump the previous day, buoyed by hints from U.S. President Donald Trump he may intervene in the price war between Saudi Arabia and Russia at an “appropriate time.”

U.S. crude and global benchmark Brent have both collapsed about 40% in the last two weeks since talks between the Organization of the Petroleum Exporting Countries and its allies, including Russia, broke down which led Saudi Arabia, the world’s biggest oil exporter, to ramp up supply.

The more active West Texas Intermediate (WTI) crude futures contract for May was up 43 cents, or 1.7% at $26.34 a barrel by 0151 GMT.

U.S. crude futures for April rose 56 cents, or 2% to $25.78 a barrel. The front-month April contract expires later on Friday.

Brent crude futures slipped 3 cents, or 0.1%, to $28.44 per barrel.

Brent rose 14.4% on Thursday in its biggest one-day gain since September last year.

The international benchmark, however, has plunged about 16% this week having hit its weakest since 2003 on Wednesday.

The Trump administration is considering a diplomatic push to get Saudi Arabia to close its taps and using the threat of sanctions on Russia to force them to reduce output, the Wall Street Journal reported, quoting unidentified sources.

“A fair bit of short covering ensued after President Trump suggested he may tackle the oil crisis by brokering a deal between Moscow and Riyadh,” Stephen Innes, chief market strategist at AxiCorp, said in a note.

U.S. crude prices were also supported by the country’s plans to buy crude for stockpiling after the U.S. Department of Energy said it would buy up to 30 million barrels of crude oil for the Strategic Petroleum Reserve by the end of June.

“Buying oil for the strategic reserve is a very constructive measure to help some U.S. producers avoid collapse amid the international price war,” said Per Magnus Nysveen, head of analysis at Oslo-based energy research firm Rystad Energy.

Overall market sentiment still remains clouded by concerns the coronavirus epidemic will continue to suppress economic activity around the world, while markets are awash with cheap supplies due to the Saudi Arabia-Russia price war.

“Global oil demand is falling at an unprecedented pace…Saudi Arabia and Russia remain at the focal point of the price plunge, but the negative demand shock to the market may define the next several weeks,” said Helima Croft, global head of commodity strategy at RBC Capital Markets.