MELBOURNE (Reuters) – Benchmark U.S. crude fell more than 1% in early trade on Friday, coming off its biggest one-day gain in the previous session after U.S. President Donald Trump said he expected Saudi Arabia and Russia to announce a major oil production cut.
U.S. West Texas Intermediate (WTI) crude CLc1 futures were down 1.4%, or 36 cents, at $24.96 a barrel at 2223 GMT, after having surged 24.7% on Thursday.
Even with the huge gains, prices have still slumped nearly 60% this year as oil demand has plummeted due to the coronavirus pandemic while Saudi Arabia and Russia have flooded the market with crude in a price war.
Trump said he had spoken to Saudi Crown Prince Mohammed bin Salman, and expects Saudi Arabia and Russia to cut oil output by as much as 10 million to 15 million barrels, as the two countries signaled willingness to make a deal.
Analysts said even if Russia and Saudi Arabia agreed to cut production by as much as 15 million barrels per day (bpd) that would not be enough to balance the market in face of a deep economic recession.
“The 10-15 million bpd oil production cut reportedly being brokered by President Trump is a great start, but deeper cuts will likely be needed to get through a difficult Q2,” said Stephen Innes, chief global market strategist at AxiCorp.
A deal between Russia and Saudi Arabia could effectively establish a floor for WTI in the $30s, he said.
Reporting by Sonali Paul; Editing by Sandra Maler and Lisa Shumaker