Falling oil prices on Monday showed that oil producers still have a mountain to climb despite record output cuts in an effort to restore market balance as the coronavirus pandemic shreds demand and sends stockpiles soaring, industry watchers said.
FILE PHOTO: A sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, U.S. November 22, 2019. REUTERS/Angus Mordant/File Photo
“Even if these cuts provide a floor to prices they will not be able to boost prices given the scale of inventory builds we are still staring at,” Energy Aspects analyst Virendra Chauhan said, referring to fast-filling storage amid the slide in demand from end-users. “This 9.7 million bpd ‘headline’ deal represents a 12.4 million bpd cut from claimed April OPEC+ production but an only 7.2 million bpd cut from 1Q20 average production levels,” Goldman Sachs analysts said.However, energy analysts at FGE expect oil stockpiles in developed nations to grow in the second quarter to levels last seen in 1982.
“Most of the SPR are pretty full already. Probably China still has some room, but the rest, I doubt there is anything significant,” he added. “China is unlikely to make any firm commitment, especially as Far East consumers are still paying a premium for Mideast supplies versus western consumers,” one Beijing-based state oil company official said on condition of anonymity, citing company policy.
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