Oil prices slumped more than 50 cents a barrel on Monday, even after major producers agreed their biggest-ever output cut. Gains evaporated amid concerns that the output cuts will not be enough to head off oversupply, with the Coronavirus pandemic still hammering demand.
After days of deliberations, OPEC and its allies, led by Russia, agreed yesterday to reduce oil output by 9.7 million barrels per day for the months of May and June. The cuts represent about 10% of global supply and is intended to help crude prices to rebound.
Brent crude fell by 0.50$, or 1.70%, to $30.91 a barrel by 9.12 am local time after opening at a session high of $33.99. U.S. West Texas Intermediate (WTI) was up at $0.78, or 0.39%, to $22.81 a barrel, after hitting a high of $24.74.
Leaders of the top three crude oil producers – America’s President Trump, Russian President Putin, and Saudi Arabia’s King Salman – all agreed to the OPEC+ deal to reduce global crude oil production.
In addition, the Kuwaitis, Saudis, and the United Arab Emirates all supported the move for more cuts, even deeper than those already agreed. According to them, this could help to effectively bring the OPEC+ supply lower by 12.5 million bpd from present supply levels.
Norway and Canada also indicated their willingness to reduce oil production. The Americans stated that their crude oil output would be dropping as much as 2 million barrels per day in 2020 because of low prices.
Despite all the efforts, concerns over global demands erased oil price gains from the Asian trading session. Global crude oil consumption has dropped by about 30%, due to the COVID-19 outbreak that has killed over 100,000 people around the world, and kept most businesses shut.
In Nigeria, a lockdown measure that was adopted in early April has been extended indefinitely. More than three hundred people have been infected by the virus in the country, with more than five deaths recorded.