Surprise Record Gains For Crude, But Analysts Think Oil May Have to Plummet To The Teens Anyway

Meanwhile, Kemp calls for leadership in resolving the Saudi/Russian dispute: File Image/PixaBay

If nothing else, the crude trading sector can't be accused of being boring: following three days of benchmarks plummeting to near 20 year lows, crude on Thursday shot up by 25 percent, the largest single-day gain on record.

West Texas Intermediate settled up $4.85, or 24 percent, to $25.22 per barrel; Brent settled up $3.59, or 14.4 percent, at $28.47 per barrel.

The surprise rebound - which analysts warned was temporary - was attributed to several factors:  U.S. lawmakers rushing to develop a massive economic stimulus package to counter the impact of the coronavirus outbreak; the European Central Bank likewise kicking off a 750 billion euro ($820 billion) emergency bond purchase scheme; and U.S. president Donald Trump stating on Thursday that he would intervene in the crude price war between Saudi Arabia and Russia "at the appropriate time."

For his part, John Kemp, market analyst for Reuters, noted that Washington "will not permit the [Saudi/Russian] volume war to threaten the survival of the entire U.S. shale sector or its dream of energy independence, so political and diplomatic pressure is inevitable."

He added that "top policymakers in Riyadh, Washington and Moscow will all need to show real leadership by modifying their strategies in the face of changed circumstances."

Meanwhile, unimpressed by Thursday's crude trading behaviour, Jeffries analysts said in a note, "From April 1, about 4 million barrels per day could flood the markets, potentially pushing down crude oil prices into the teens."

From the Bank of America's perspective, if push comes to shove, oil in the teens may be necessary: it said in a research note, "if the market struggles to find a home for surplus barrels then oil prices might have to trade down into the teens in order to shut in oil production."