Crashing Oil Prices Surge This Time... "Expecting US Intervention in Saudi-Russia Oil War"

WTI Surges 23.25% in One Day to $25.22 per Barrel
Trump: "Will Intervene at the Right Time"
US Diplomatic Pressure on Saudi and Russia Expected to Increase

[Asia Economy Reporter Naju-seok] Oil prices rebounded sharply by the largest margin ever in a single day as prospects emerged that the United States would intervene in the 'oil price war' triggered by the conflict between Russia and Saudi Arabia. Attention is focused on whether Russia and Saudi Arabia, who intend to increase crude oil production despite the demand decline caused by the novel coronavirus disease (COVID-19), will back down following U.S. intervention.

On the 19th (local time) at the New York Mercantile Exchange, the price of April West Texas Intermediate (WTI) crude oil closed at $25.22, up 23.8% ($4.85). This is the highest increase rate ever recorded. WTI had plunged 24.4% the previous day, marking its lowest level since February 2002. Brent crude also rose 14.4% to trade at $28.47. The worst-case scenario of 'entering the $10 per barrel range' was avoided for the time being.

The sharp rebound in international oil prices was largely influenced by the United States, the world's largest crude oil producer, signaling active involvement. Facing limits even in its domestic oil industries such as shale oil, U.S. President Donald Trump said in a press briefing that "the United States will try to find a middle ground (between Russia and Saudi Arabia)" and "they are waging a war over price and production, and we will intervene at the appropriate time."

The Wall Street Journal (WSJ), citing officials, introduced more specific U.S. response plans. According to the report, the U.S. plans to undertake diplomatic efforts to have both Russia and Saudi Arabia withdraw their production increase policies to stabilize the oil market. Initially, the U.S. intends to persuade Saudi Arabia to cancel its production increase plans and maintain existing production levels. In particular, the U.S. government is known to focus on dispelling concerns that Saudi Arabia's production cuts could benefit Russia. The measure under consideration by the U.S. includes economic sanctions against Russia.

It is reported that the U.S. has started discussions with Saudi Arabia through various channels, including the State Department, Department of Energy, and the White House.

The oil price rebound also reflects expectations for the U.S. plan to expand its Strategic Petroleum Reserve and economic stimulus measures announced by governments worldwide in response to COVID-19. The U.S. Department of Energy announced plans to increase the Strategic Petroleum Reserve to its maximum capacity.

The U.S. government's willingness to address the oil price issue stems from the crisis faced by shale companies that have produced crude oil and natural gas domestically. Shale companies, which have higher extraction costs compared to Saudi Arabia and others, are recording losses due to the oil price plunge. Chesapeake Energy, a leading company in the U.S. shale revolution, is reportedly considering restructuring due to the international oil price shock.

Despite the U.S. government's intention to intervene, there are views that the downward trend in oil prices will be difficult to stop. Jeffrey Curry, Global Head of Commodity Research at Goldman Sachs, explained that "downward pressure on oil prices is greater." The oil market consulting firm Rystad Energy has mentioned the possibility that oil prices could eventually fall to the $10 per barrel level.

This content was produced with the assistance of AI translation services.