Oil prices rallied after a call between US president Donald Trump and his Russian counterpart Vladimir Putin raised hopes that tensions between Moscow and Saudi Arabia may start to ease.
Brent crude prices rose as much as 3.5% to $23.55 overnight, after hitting an 18-year low of less than $23 per barrel on Monday. The global benchmark for oil prices lost some of its gains later on Tuesday, but was still trading just above the $23 level at $23.01, a rise of 1.1%.
Oil giant Shell said on Tuesday that it would take a $400-$800m (£325-£650m) charge in the first quarter as a result of plunging crude prices. The company is already planning to slash $9bn (£7.2bn) from its spending plans to weather the collapse in prices amid the coronavirus pandemic.
The plunge in oil prices has been sparked by a bitter price war between Saudi Arabia and Russia. Both producers are preparing to pump record amounts of oil to gain a greater share of the global market, despite a plunge in demand for energy during the coronavirus crisis. It has triggered the sharpest drop in oil since 1991.
While Saudi Arabia denied it was in talks with Russia over a potential truce on Monday, news of Trump’s call to Putin sparked a degree of hope among investors that global leaders may be ready to compromise in order to support the oil market.
The Kremlin said in a statement that the two leaders discussed the coronavirus pandemic and “exchanged views on the current state of the global oil market and agreed that Russian and American energy ministers should hold consultations on this topic”.
Analysts suggest Trump could be willing to cut US shale production or ease sanctions on Russian oil companies, such as Rosneft, in order to lure Moscow back into negotiations with oil cartel Opec.
Elsa Lignos, a senior strategist at RBC Europe, said: “Yesterday Trump called Putin in what our commodities team says ‘may prove to be an important turning point in the stand-off between Moscow and Riyadh’. They argue a rollback of some US energy sanctions could be the catalyst for getting Russia back to the Opec+ bargaining table.
“A key question for the White House is whether it is worth continuing with the sanctions if they prevent a production agreement which could help save the US shale industry.”
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