OPEC+ deal could boost oil prices, but oversupply remains
SINGAPORE/NEW YORK - Oil prices jumped more than $1 a barrel on Monday after major producers finally agreed their biggest-ever output cut, but gains were capped amid concern that it won’t be enough to head off oversupply with the coronavirus pandemic hammering demand.
Total global oil supply cuts could come to 20 million barrels per day, around 20% of global supply, Kuwait’s oil minister said. “This restrains the build-up of inventories, which will reduce the pressure on prices when normality returns – whenever that is.” “After an initial positive reaction in oil prices, we expect the OPEC+ decision at best to establish a floor under the market,” BNP Paribas’ Harry Tchilinguirian said in a note, adding that oil price gains could also be capped by hedges from producers.
OPEC+ has also said it wanted producers outside the group, such as the United States, Canada, Brazil and Norway, to cut a further 5% or 5 million bpd.
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