A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.

Dado Galdieri | Bloomberg | Getty Images

Oil prices rallied on Thursday after President Donald Trump talked up the possibility of Saudi Arabia and Russia ending a price war that has contributed to crude’s massive plunge.

West Texas Intermediate crude futures surged $1.83, or 9%, to trade at $22.14 per barrel. Earlier in the session WTI traded as high as $22.60. International benchmark Brent crude jumped 8.5%, or $2.12, to trade at $26.86 per barrel.

“Worldwide, the oil industry has been ravaged,” Trump told reporters Wednesday evening. “It’s very bad for Russia, it’s very bad for Saudi Arabia. I mean, it’s very bad for both. I think they’re going to make a deal.”

Trump added he expects both countries to end their price war within a “few days.” Trump made his remarks ahead of a meeting with energy industry executives scheduled for Friday.

“Who has the biggest problem? Saudi, and Russia. Saudi above all,” Mizuho analyst Paul Sankey said in a note to clients. “Their burn rate in this market will use up their $500bn reserve pile within two years.”

OPEC countries led by Saudi Arabia proposed last month a production cut of 1.5 million barrels per day as demand waned. However, OPEC ally Russia rejected the cut, sparking a price war between the two powerhouse producers. The production cuts that were previously in place expired on March 31. On Wednesday, Saudi Arabia ramped up its production to more than 12 billion barrels per day.

The shock to both the demand and supply side has sent oil prices tumbling. On March 6, U.S. crude was trading above $41 per barrel. Since then, crude has lost about half of its value.

“Saudi Arabia is fulfilling its pledge of raising oil exports following the collapse of the OPEC+ agreement with Russia,” Neil Beveridge of AB Bernstein said in a note. “We expect unprecedented levels of stock builds in 2Q20 which could test the limits of both onshore and floating crude capacity.”

Some were quick to note that even if an agreement is reached, it still might not be enough to counter the oversupply brought about by the demand destruction.

“The challenge though is the size of the oversupply problem. Saudi Arabia and Russia won’t singlehandedly remove for instance half (5 million bpd) of their [country’s] oil production to save the potential 10-12 million bpd of upstream shut-ins required to balance the market in the second quarter,” said Rystad Energy’s head of oil markets Bjornar Tonhaugen.

“At best, we believe parties will agree to continue discussing and monitor the market situation,” he added.

Crude also got a boost Thursday after Bloomberg News reported — citing people with knowledge of the matter — that China will start buying oil for its emergency reserves.

—CNBC’s Michael Bloom contributed to this report.

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