Oil gives up gains despite historic Opec+ output cut

CALGARY: Oil pared gains as investors weighed whether an unprecedented deal by the world’s biggest producers to cut output could stabilise the market reeling from the coronavirus pandemic.

Futures in New York were little changed after earlier surging 8.7% after the Opec+ alliance agreed to slash production by 9.7 million barrels a day starting in May. The group reached the deal following days of intense negotiations after Mexico declined to endorse the original agreement reached Thursday. While the Opec+ deal amounts to the largest coordinated cut in history, it’s dwarfed by the estimated 20 million barrels a day or greater decline in oil consumption as a result of the pandemic.

The US, Brazil and Canada will contribute an additional 3.7 million barrels in nominal production cuts as their output declines, and other Group of 20 nations will cut 1.3 million more. The G-20 numbers don’t represent real voluntary cuts but rather the impact that low prices have already had on output, and they would need months to take effect.

The Opec+ deal came after days of brokering by US President Donald Trump, who spoke by phone Mexican President Andres Manuel Lopez Obrador, followed by a three-way conference call with Russian President Vladimir Putin and King Salman of Saudi Arabia.

Saudi Aramco reduced pricing for all its grades to Asia, signaling the state company’s intention to defend sales in its biggest market even while paring output. Oil prices have been in freefall since the middle of February as the world went into lockdown to try to stop the coronavirus from spreading.