Some oil markets are beginning to react to the unprecedented deal agreed by the Organization of Petroleum Exporting Countries (OPEC) and its allies, together with other major oil producers.
They have expressed doubts as to whether these cuts will be enough to make up for the low demand for crude, which the Coronavirus pandemic has caused.
With the agreement of OPEC+ and other oil producers on a crude oil output cut of 9.7 million barrels per day, analysts have stated that it might not be enough to help stabilize the oil market.
According to them, an output cut of at least 20 million barrels of crude oil per day will be needed to actually have an impact in the market which has seriously been affected by COVID-19.
Meanwhile, some of the stakeholders, including Saudi Arabia, have shown interest in another cut. That means there are indications that such would be considered when the OPEC and its allies meet again in June to further stabilize the market.
According to Bloomberg, cuts by OPEX+ will start in May, removing almost a 10th of global output. Saudi Energy Minister Prince Abdulaziz bin Salman explained on Monday that the kingdom is ready to trim production even further if needed, but will only cut if others in the alliance curb their supply accordingly.
Impact on oil prices
According to a monitored report from Bloomberg, the Asian market is experiencing an increase in crude oil prices with support from the commitment of the biggest producers. While West Texas rose by 41 cents to close at $22.41 on Monday, the Brent crude also increased when it rose to $31.74 per barrel from $31.40.
The oil market had witnessed an unprecedented crash in crude oil prices globally primarily due to the outbreak of the coronavirus pandemic and the trade war between Russia and Saudi Arabia.
There are concerns that the OPEC+ deal might not be enough, especially when the market has demand losses that might be up to 35 million barrels a day.
Goldman Sachs had said in a note that the output cut by OPEC+ would lead to actual production cut of 4.3 million barrels per day from first quarter.