Record oil output cuts fail to make waves in corona virus-hit market

Florence Tan, Shadia Nasralla

SINGAPORE/LONDON (Reuters) - The minimal impact on oil prices from a global deal for record output cuts showed that oil producers have a mountain to climb if they are to restore market balance as the corona virus shreds demand and sends stockpiles soaring, industry watchers said.

After several days of discussions, oil producing and consuming countries aim to remove nearly 20 million barrels per day (bpd) or 20% of global supply from the market, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said on Monday.

The oil market has barely shrugged, however: Brent crude gained 1.5% on Monday, while U.S. crude ended the day lower. The move underscores what both investors and producers already understand - that the monumental deal to cut supply in face of a 30% drop in demand could only accomplish so much initially.

The Saudi energy minister downplayed the move in oil prices on Monday, saying anticipation of the cuts was the reason for a rally in oil prices before the meeting. Since dipping below $22 a barrel two weeks ago, Brent has rebounded by roughly 48%.

“It’s the typical deal, you know: buy the rumour, and sell the news,” Prince Abdulaziz bin Salman said.