Oil clung to gains as the Organization of the Petroleum Exporting Countries and Russia (OPEC+) supply-curb proposal during a virtual meeting yesterday was in line with previous expectations.
Brent futures were up more than three per cent $1.17 to $34.01 a barrel in London after earlier jumping nearly 11 per cent while West Texas Intermediate rose $1 to $26.09 a barrel as of 12:19 p.m. in New York.
The producer group, which includes Saudi Arabia and Russia, is set to cut 10 million barrels a day of its oil output for two months. That compares with estimates for demand loss of as much as 35 million barrels a day.
OPEC+ also plans to seek an additional cut of five million barrels a day from Group of 20 countries (G20), which will meet today (Friday). The decision at the OPEC+ virtual gathering will form the basis of today’s discussions on further contributions from G-20 nations, with U.S. involvement seen as key.
The Kremlin has insisted that America must do more than just let market forces reduce its own record production. U.S. President Donald Trump, meanwhile, has said his country’s cut will happen “automatically” as low prices put the shale patch in dire straits.
Major producers are scrambling for a deal as energy consumption has plummeted and hammered prices. Oil demand in India has collapsed by as much as 70 per cent and some American refineries face closure as consumption fell to the lowest in at least three decades. Producers will need to agree on a deep and prolonged supply cut, or risk crude falling back again.
The head of the International Energy Agency (IEA), Fatih Birol, said today’s talks could see importing nations announce plans buy oil for their strategic reserves to boost demand, said.
Global fuel demand has plunged by as much as 30 million barrels per day (bpd), 30 per cent of global supplies, as measures to fight the coronavirus have grounded aircraft, reduced vehicle usage and curbed economic activity. So, even a 20 million bpd cut falls short.
In the United States, gasoline demand tumbled 48 per cent to 5.1 million bpd in a three-week period to April 3. Several U.S. states could order private companies to limit production under rarely used powers. The oil regulator in Texas, the largest producer among U.S. states with output of about five million bpd, meets on April 14 to discuss possible curbs.