Oil rallies as top producers agree massive output cuts 1

Oil rallies as top producers agree massive output cuts

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After top producers agreed to cut production and support the energy market hit by coronavirus, oil prices rose on Monday. However, some analysts worry that the price reduction is not enough.

In the Asian market, the US benchmark West Texas Intermediate crude oil rose 7.7% to US $ 24.52 per barrel, while the international benchmark Brent crude rose 5.0% to US $ 33.08 per barrel.

OPEC oil-producing countries led by Saudi Arabia and allies led by Russia met on a video conference on Sunday for an hour, with a view to providing the final effort for a deal concluded earlier on Friday.

According to Energy Minister Rocio Nahle, it still needs Mexico ’s consent. In the compromise reached on Sunday, they agreed to reduce production by 9.7 million barrels per day from May. Ten thousand barrels fell slightly.

OPEC Secretary-General Mohammed Bakindo called the production cut “historic.”

The oil market has been in turmoil for several weeks. Blockades and travel restrictions imposed in response to virus outbreaks worldwide have stifled demand. The price war between Russia and Saudi Arabia has exacerbated the crisis.

Although the price increase on Monday is healthy, in highly volatile markets, the increase is not as good as the double-digit increase and decrease in recent weeks, and analysts are skeptical.

The number of cuts was slightly lower than expected, and observers said it could not make up for the expected loss of demand due to the virus outbreak. Some analysts believe that the daily output in April was about 25 million barrels.

In addition, storage tanks around the world are quickly filling up.

Andy Lipow, president of Houston Lipow Oil Associates LLC, told Bloomberg News: “Given that Mexico has become easier, this deal is less than what the market expected.”

“Given that the market is very skeptical about whether OPEC + oil can actually reduce production by nearly 10 million barrels per day, hard work is still needed.”

AxiCorp’s Stephen Innes added: “There are still concerns that the agreement may be delayed by one day and there is a shortage of barrels to prevent prices from falling due to rising storage capacity in the coming weeks.”

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