NEW YORK/LONDON (Reuters) - OPEC and other major oil producers on Thursday said they would cut output by 10 million barrels per day for two months in the face of a huge fall in demand due to the coronavirus crisis.
The Organization of the Petroleum Exporting Countries and other producers including Russia, a group known as OPEC+, agreed Thursday to cut production by 10 million barrels per day, starting May 1. The group will then ease the cuts to 8 million bpd until the end of the year, and then 6 million bpd in January.
Analysts say that, despite the sweeping nature of the cuts, they will not be enough to rebalance the market.
The group of producers did not say they required cutbacks from other producers as a condition for implementing the cuts.
John Kilduff, managing partner: “OPEC+ seems to disappoint the market more often than not. ... They needed to move mountains here and they maybe moved a hill.”
Michel Salden, head of commodities: “Today’s ‘deal’ did not bring much clarity so far and looks more like an invitation to the G20 energy ministers to agree on a 5 mbpd cut tomorrow which would bring the overall cut in oil output to 15 mbpd.”
Scott Shelton, energy specialist: “While OPEC is cutting as expected, there is simply too much crude in the physical space for sale, with too few pipelines to move it and too few buyers to take it. The most expensive priced oil in the U.S. is Cushing WTI for May and that is likely to lead us to lower prices regardless of what OPEC does.”
Michael Tran, managing director of energy strategy: “The market’s muted price reaction is a sobering indicator of the headwinds that remain, namely demand destruction. An acute near-term surge in crude prices would cripple refining economics and result in further run cuts.”
Roger Read, senior energy analyst: “Until the extreme social distancing economic shutdown measures are significantly relaxed across North America, Europe and parts of Asia, OPEC+ supply cuts are simply playing catch-up at best.”
Ethan Bellamy, senior analyst: “10 million barrels per day is insufficient to balance the market. ... OPEC’s only real choice to bring the U.S. and other higher-cost producers along is to allow price to ration supply. With half a trillion in reserves, we think the Russians can outlast U.S. producers in a fight for market share.”
Bjornar Tonhaugen, head of oil markets: “A 10 million-bpd deal is far lower than what the market needs at the moment. And even that seems to be of a fragile nature, as OPEC+ producers appear to struggle to agree, dragging negotiations longer than expected.”
“Our updated 2020 global oil balance suggests that a 10million barrels per day (bpd) headline cut (for an effective 6.5million bpd cut in production) would not be sufficient, stillrequiring an additional 4 million bpd of necessary price inducedshut-ins.”
Bob Yawger, director of energy futures: “It will only slow filling of storage. It’s not going to save the day, but it’s better than nothing.”
The head of the International Energy Agency, Fatih Birol,said a production cut of as much as 10 million bpd would stillresult in a 15 million-bpd buildup of crude in the secondquarter.
Kirill Tachennikov, director and senior oil analyst: “It is not technically possible to achieve these numbers in less than a month, and it is not enough to offset current oversupply that is exceeding 20 million bpd as it stands. As a result, the challenges of oil storage gradually filling up is still a very real issue.”
Compiled by Ron Bousso and Jessica Resnick-Ault; Additional reporting by Devika Krishna Kumar, Jennifer Hiller and Laila Kearney; Editing by Marguerita Choy and Lisa Shumaker