Oil futures: Prices settle about 10% higher, bouncing after historic decline

Washington — Oil futures prices settled roughly 10% higher Tuesday, rebounding following Monday's historic collapse, on the prospects of renewed OPEC+ production cut talks and reports the Trump administration was considering a financial bailout for US oil and natural gas producers.

The NYMEX April light sweet crude contract settled at $34.36/b, up $3.23/b from Monday's settle, while May ICE Brent crude futures settled at $37.22/b, up $2.86/b.

On Monday, the front-month NYMEX contract settled at $31.13/b Monday, down $10.15 or 25% day on day, while ICE front-month Brent settled at $34.36/b, down $10.91 or 24%.

"Risk aversion is tentatively back, and oil prices are clearly benefiting from the broader market rally," OANDA analyst Edward Moya said Tuesday.

Saudi Arabia, which announced Tuesday it would boost its supplies to the market in April to a record 12.3 million b/d, may soon dispatch its former energy minister, Khalid al-Falih, for talks with Russian energy minister Alexander Novak to smooth over tensions, a source familiar with the matter told S&P Global Platts.

Novak told the Rossiya 24 news channel that he was open to future oil market management with OPEC, but said Russia could potentially increase its oil production by 200,000 b/d to 300,000 b/d in the short term, and up to 500,000 b/d in the long term. In February, the country produced 11.38 million b/d of crude and condensate, according to Platts estimates.

OPEC+ negotiations to increase production cuts in response to the decline in demand due to the coronavirus outbreak fell apart Friday, and without a deal in place, current production quotas are set to expire at the end of March.

The collapse of the OPEC+ agreement and the ongoing war for market share are expected to impact US shale operators most deeply.

The Washington Post reported Tuesday the White House may pursue federal aid for US shale companies hit by the decline in oil prices.

"The federal assistance is likely to take the form of low-interest government loans to the shale companies, whose lines of credit to major financial institutions have been choked off," according to the newspaper.

In a note to clients Tuesday, Eric Nuttall, partner and portfolio manager at Ninepoint Partners, said oil companies had "overnight gone into survival mode with Cenovus, Marathon, and others aggressively cutting 2020 capital spending while one small cap reduced its dividend by 90%."

Occidental Petroleum said Tuesday its 2020 capital spending will be reduced by roughly 32% in terms of the midpoint to $3.5 billion-$3.7 billion on the back of the oil price plunge.

"This is only the beginning," Nuttall wrote. "The oil and gas industry does not function at current oil prices."

Refined products also settled higher Tuesday after tumbling Monday. NYMEX front-month ULSD settled at $1.2499/gal, up 8.70 cents, while NYMEX RBOB settled at $1.1571/gal, up 2.02 cents.