Record oil output cuts fail to make waves in coronavirus-hit market
A day after the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia agreed to reduce output by 9.7 million barrels per day (BPD) in May and June - equal to nearly 10% of global supply - prices were little changed, oscillating in and out of the positive and negative territory. [O/R]
Both Brent LCOc1 and WTI CLc1 have lost more than half of their value so far this year.
The headline cut by the producer group known as OPEC+ may be more than four times deeper than the previous record set in 2008 and could provide a floor for prices, but the reduction remains dwarfed by a demand drop predicted by some forecasters to be as much as 30 million BPD in April.
What’s more, governments around the globe are considering extending travel and social lockdown measures to prevent the coronavirus from spreading.
“Even if these cuts provide a floor to prices they will not be able to boost prices given the scale of inventory builds we are still staring at,” Energy Aspects analyst Virendra Chauhan said, referring to fast-filling storage amid the slide in demand from end-users.
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