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Headline-grabbing oil deal ‘too little, too late’


An unprecedented Easter Sunday OPEC+ accord to slash nearly 10 million barrels per day from the global oil market is “too little and too late,” analysts say.

That is because the cuts – led by Saudi Arabia and Russia, the world’s second and third-largest producers – are dwarfed by approximately double the loss in global demand.

“No voluntary cuts could be large enough to offset the 19m b/d (19 million barrels per day) average April-May demand loss due to the coronavirus,” said Goldman Sachs.

“Today’s agreement leaves the voluntary cuts as still too little and too late,” the firm said in a note on Sunday.

The OPEC+ cuts are essentially a climbdown from the hyper-production levels of the past month, during which Saudi Arabia flooded the market in a showdown with Russia. That flood of oil coincided with Covid-19 reaching pandemic status, obliterating global demand.

Given the “ongoing surge” of production from Saudi Arabia and its allies the UAE and Kuwait, the touted headline deal, Goldman Sachs writes, actually represents a less impressive 7.2 million bpd cut from Q1 levels.

Factor in the less-than-stellar 35% compliance rate outside the core OPEC member states, and it is clear the voluntary cuts would need to go much further to make a dent, the firm said.

The cementing of the OPEC+ accord briefly boosted crude – from about US$22 to nearly $24.50 per barrel Sunday night – only to see them sink back to about $23 Monday morning.



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