By Salma El Wardany, Grant Smith and Javier Blas
Crude prices have collapsed despite unprecedented production cuts announced by OPEC and its partners just over a week ago. The group’s 9.7 million barrels a day of curbs, however, aren’t nearly enough to counter lost demand as the coronavirus outbreak forces countries to lock down. Oil futures in New York slumped below zero on Monday for the first time ever as storage space for surplus barrels runs out. Prices continued their plunge on Tuesday.
“We continue to see extraordinary turmoil in oil markets in this Black April for the industry,” Fatih Birol, executive director of the International Energy Agency, said on Twitter. “The OPEC+ supply cut is a solid start but insufficient to rebalance the market immediately due to the scale of the drop in demand.”
Saudi Arabia, OPEC’s biggest member, reiterated in a statement on Tuesday that it’s prepared for further measures with the rest of the group and its allies to ensure market stability.
The organization has also received a proposal from Algeria, which this year holds OPEC’s rotating presidency, to start the planned cutbacks immediately, instead of May 1 as currently scheduled. The suggestion hasn’t so far received backing from bigger members.
It’s also unclear whether the Saudis and other major exporters in the group like Russia have the will, or the ability, to make deeper cuts. The latest deal already requires participants to make sharp cutbacks, which many will likely struggle to deliver.