OPEC and its allies, known as OPEC+, on Thursday agreed to historic production cuts that will take 10 million barrels per day offline as the coronavirus pandemic saps demand for crude.
The group will cut 10 million barrels per day in May and June, 8 million barrels per day from July through the end of the year, and 6 million barrels per day beginning in January 2021 and extending through April 2022.
The agreement was not contingent on nations outside of OPEC+ curbing production.
Despite the record size of the cut, oil prices moved lower on Thursday as investors feared it would still not be enough to combat the unprecedented demand loss from the coronavirus.
“Although 10 million bpd will help the market on the short term to not fill up storage, it is a disappointing development for many, who still realize the size of the oil oversupply,” said Rystad Energy’s Head of Oil Markets Bjornar Tonhaugen.
U.S. West Texas Intermediate fell 9.29%, or $2.33, to settle at $22.76 per barrel. Earlier, the contract jumped more than 12% to hit a session high of $28.36. International benchmark Brent crude slipped 4.14% to settle at $31.48, after earlier hitting a high of $36.40.
“Covid-19 is an unseen beast that seems to be impacting everything in its path,” OPEC Secretary General Mohammad Barkindo said at the meeting. “For the oil market, it has completely up-ended market supply and demand fundamentals since we last met on 6 March,” he added.
Earlier reports had suggested that Saudi Arabia and Russia were discussing cuts that could take a record 20 million barrels per day of global production offline.
Ahead of the meeting, Wall Street had been watching for cuts in the 10 million to 15 million barrels per day range after President Donald Trump said he had spoken to Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman and expected them to announce a deal of that size.
