Doubt cast on OPEC+ production cuts
LONDON, April 15, 2020 – Oil prices were mixed on Wednesday morning as investors were unconvinced that Sunday’s OPEC+ production cuts could resolve an inevitable supply glut.
“With demand destruction forecasts ranging from 15 million to 22 million bpd in April 2020 and these measures not even coming into place until May, we are likely to see a substantial overhang in the short-term,” Nitesh Shah, director of research at WisdomTree Investments, told CNBC.
Rystad Energy head of oil markets Bjornar Tonhaugen agreed with Shah, telling CNBC that implementation of the international deal would be a logistical challenge that would take weeks at least.
“Reducing upstream supply is not just turning off the tap or pushing a button. We would be surprised to see overall OPEC+ compliance at 50% through May,” he said.
Brent oil futures dropped more than 10% and US Crude Oil WTI futures shed 6.7% in the previous session. The prices were mixed in the current session as Brent futures were down 0.03% to $30 by 10:01 PM ET (3:01 AM GMT) but WTI futures gained 1.44% to $20.4.
The American Petroleum Institute (API) also forecast a 13.1-million-barrel build for the week ended April 10 on Tuesday.
“The markets will continue to grapple with some huge inventory builds that will be most evident within the highly transparent US market,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.