The price of oil boomed today amidst an otherwise gloomy week of consolidation.
President Trump first made moves to help address the plight of crude oil on April 1st. Calls to the leaders of Russia and Saudi Arabia kickstarted a series of events that led up to his tweet on Thursday the 2nd.
President Trump, after he made the call to the Crown Prince of Saudi Arabia, reported that the Crown Prince, Mohammed bin Salman, had conversed with Russian president, Vladimir Putin, and had reached an agreement concerning stabilising oil prices.
Donald Trump, now “hopes” and “expects” that the duo will cut back their oil production by approximately 10 million barrels.
He went on to declare in his tweet that oil production cuts could even edge as high as 15 million barrels.
…..Could be as high as 15 Million Barrels. Good (GREAT) news for everyone!— Donald J. Trump (@realDonaldTrump) April 2, 2020
So it appears that President Putin and the Crown Prince of Saudi Arabia, Mohammed bin Salman, have reached an agreement to at least temporarily cool off the oil price wars. The cuts to production are also a major positive for the U.S. energy industry, Trump implied.
The Implications of President Trump’s Tweet
- Oil price rise: In the hour after President Trump’s tweeted, The WTI and Brent oil prices skyrocketed. The WTI pushed to a record high of 28.70 while Brent oil prices reached a staggering 36.32 on the H1.
The last time the WTI market traded close to this point was on March 20. The previous high the market reached at that time was the 28.47 level.
Eventually, the WTI H1 candle went on to close at the 27.05 level, with prices remaining around that level since.
- Wall Street rise: There was a slight elevation in market moods after crude oil prices jumped by 20%.
The S&P 500 surged by 1.2% and the NASDAQ composite rose by 0.9%. The Dow gained 0.9%, and Chevron (NYSE:CVX) and Exxon (NYSE:XOM) both increased by more than 7%.
The S&P Oil and Gas Exploration & Production ETF (NYSE:XOP) rose by 5.8%.
Beyond the tweets, there are signs that a majority of other stocks are still heading towards rock bottom. Luckin Coffee (NASDAQ:LK) and Zoom Video (NASDAQ:ZM) stock have both suffered large falls of 71% and 5.2%, respectively.
Luckin plummeted due to the suspension of the Chief Operating Officer, while Zoom is dealing with some massive data privacy issues.
What We Think
Amidst all of this, U.S. jobless claims continue to rise dramatically. And the impacts from COVID-19 have continued to worsen the overall state of the economy.
Regardless, the President’s tweet has given a flash of hope that maybe things won’t get so bad after all.
We will now await the outcome of President Trump’s meetings with oil and gas executives at the White House. The conference will be held on Friday the 3rd April.
The President had expressed earlier that his meetings with the domestic oil industry might run through the weekend. We’ll see how that goes.