Oil surges 12% on hopes that a deal to cut production is coming soon from OPEC and its allies

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Oil surges 12% on hopes that a deal to cut production is coming soon from OPEC and its allies

oil rig


Oil gained Wednesday on hopes that Saudi Arabia and Russia will soon agree to a historic production cut, lowering supply as demand craters amid the coronavirus pandemic.

US West Texas Intermediate crude spiked as much as 12% to $26.45 per barrel on Wednesday before paring some of those gains to trade about 8% higher. International benchmark Brent crude gained nearly 4% to $33.87 per barrel the same day.

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Oil prices have plummeted with demand amid the coronavirus pandemic, which has led to canceled non-essential travel around the world. At the same time, a price war between OPEC and Russia threatened to boost supply to record levels.

Read more: C.T. Fitzpatrick has ranked in the top 1% of value managers since the financial crisis. He shares his 4-part strategy for dominating a coronavirus-stricken market - and rattles off 6 companies that will benefit from the fallout.

The US Energy Information Administration on Tuesday slashed its 2020 outlook and said it would again be a net importer of oil in a move that could pave the way for a global deal to reduce oil production.

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Now, all eyes are on OPEC and its allies as they work on the details of what could be a historic production cut plan. The group will meet virtually on Thursday and Friday and is reportedly considering slashing output by as much as 10 million barrels a day or more, Bloomberg reported, citing a delegate.

The meeting was originally scheduled to take place Monday but was postponed as a dispute between Russia and Saudi Arabia intensified, Reuters reported.

Still, Russia is skeptical of US involvement in the deal as the output decline proposed is being driven by market forces, Bloomberg reported Wednesday.

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Despite recent gains, oil is trading down more than 50% year-to-date.

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Get the latest Oil WTI price here.

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