After Massive Rout, Oil Rebounds Somewhat on Potential U.S. Stimulus Package, OPEC-Russia Talk Hopes, an Industrial Info Market Brief

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After their biggest one-day drop since January 1991 at the start of the Gulf War, the prices of both Brent and West Texas Intermediate (WIT) crude oils gained about 8% on Tuesday. Prices tumbled on Monday as a combination of both the threatened impact of the COVID-19 coronavirus on global oil demand and the price war between Saudi Arabia and Russia.

On Monday, as recent talks in Vienna brought a disagreement on future curtailments between OPEC and Russia, OPEC leader Saudi Arabia launched a price war, announcing that it would produce a record 12.3 million barrels per day next month, up 25% from the previous month, a sharp detour from the last few years of production curtailments. According to news media, in order to sustain this level of supply, the kingdom will need tap its strategic inventories as its boosts production over maximum sustainable capacity. As oil prices plunged in response to the news, the U.S. announced that its was suspending the planned sale of up to 12 million barrels of oil from its Strategic Petroleum Reserve.

In response to the drop in prices, oil producers Cenovus and Marathon Oil announced that they would cut planned spending. Other companies are considering a reduction. Occidental Petroleum announced would cut dividends.

However, on Tuesday, prices rebounded. Russia indicated that further talks with OPEC remained possible, and the U.S. awaits an announcement by President Donald Trump on a potential stimulus package in the U.S. to help buffer the economy from the impact of the coronavirus. In addition, there are indications that U.S. oil producers will cut back drilling and production due to the lower prices.