Crude Oil: OPEC+ agreed to joint cuts on the order of 10 mb/d, a historic agreement. The deal calls for both Saudi Arabia and Russia capping production at 8.5 mb/d for May and June, after which cuts would ease in phases – down to 8 mb/d and then to 6 mb/d of cuts. The deal was not received well by the markets, which sold off WTI and Brent over fears that the reductions are inadequate. “The supply and demand fundamentals are horrifying,” said OPEC Secretary-General Mohammed Barkindo.
G20 meets to chip in. OPEC+ is also looking for help from other non-OPEC countries in the G20. Mexico temporarily held up the OPEC+ deal because it does not want to cut. At the time of this writing, Mexico’s president said that he spoke with President Trump, who promised to contribute to the cuts on Mexico’s behalf. “First they asked us for 400,000, then 350,000” Mexico’s President Lopez Obrador said. Mexico was only able to cut by 100,000 barrels a day, and Trump “very generously expressed to me that they were going to help us with an additional 250,000 to what they are going to contribute. I thank him.”
Demand loss at 20-30 mb/d. The OPEC+ deal is historically large, but still insufficient to plug a 20 to 30 mb/d decline in demand. Inventories are set to rise in the coming months. “The proposed 10 million bpd cut by OPEC+ for May and June will keep the world from physically testing the limits of storage capacity and save prices from falling into a deep abyss, but it will still not restore the desired market balance,” Rystad Energy said.
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