Oil market falls too big to offset with output cuts, IEA warns

Graphic – Oil supply response: here

“There is no feasible agreement that could cut supply by enough to offset such near-term demand losses. However, the past week’s achievements are a solid start.”

Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia on Sunday agreed a record cut in output from May of 9.7 million bpd, or almost 10% of global supply, to help support prices and curb oversupply.

Graphic – Total non-OPEC supply: here

Ahead of that, however, April could prove the worst month ever for the industry as production is set to increase while demand tumbles amid economic lockdowns around the world, IEA Executive Director Fatih Birol said.

“When we look back on 2020 we may well see that it was the worst year … April may well have been the worst month – it may go down as Black April,” Birol told reporters on a call.

Graphic – Demand/supply balance: here

Oil producers “lost two very important months”, Birol added, referring to events including the failure of producers in early March to agree on cutting output. Instead, Saudi Arabia, Russia and others pledged to increase production as they looked to grab back market share.

Now, in addition to planned supply cuts, some nations are expected to boost buying for strategic reserves.