Oil extends rally as Russia agrees to production cut

SYDNEY (Bloomberg) - Crude extended gains in Asia after Russia said that it was prepared to reduce output to help stabilize the market before a meeting of top producers later on Thursday.

Futures in New York rose as much as 6.1%, after gaining 6.2% on Wednesday. A global supply-curb agreement may be sealed at the OPEC+ emergency virtual meeting on Thursday after Russia said that it is ready to cut oil production by 1.6 million barrels a day, or about 15%. A “massive output reduction” would be discussed, said the energy minister of Algeria, which holds OPEC’s rotating presidency, amid persistent doubts that cuts will be enough to offset the unprecedented demand destruction caused by the spread of coronavirus.

G20 energy ministers will meet remotely on Friday to discuss broader measures to steady the market. India, the world’s third-biggest oil consumer, is set to snap up millions of barrels of Middle East crude for its strategic reserves, according to officials with knowledge of the matter, even though demand has collapsed 70% as the country endures the world’s biggest national lockdown.

“This meeting will be an important opportunity to assess impacts on global energy markets and reassure both markets and energy consumers,” Australia’s Energy Minister Angus Taylor, who will attend Friday’s meeting, said in an emailed statement.

Prices

• West Texas Intermediate for May delivery gained $1.20 to $26.29 a barrel on the New York Mercantile Exchange at 8:31 a.m. Sydney time.
• May WTI settled Wednesday $1.46 higher at $25.09 a barrel.
• Brent for July delivery ended 97 cents higher at $32.84 a barrel.

Administration on Tuesday cutting its 2020 production forecast by more than 1 million barrels a day has helped to smooth the path. Still, Moscow remains skeptical about the U.S. commitment, with Kremlin spokesman Dmitry Peskov saying that Russia does not consider a supply reduction driven by falling demand or lower prices to be a real output cut.

Oil gained even after the U.S. EIA reported a 15.2 million barrel weekly increase in crude stocks, the biggest gain in data going back to 1982.

Despite gains in the futures market, physical prices continue to fall as refineries cut processing rates and purchases. North American landlocked crudes are fetching ever lower prices, with grades in the U.S. Bakken region back beneath $10 and oil in Canada at a record low.