Oil Slips Despite Historic Production Cut Deal, While Business Questions Draconian Virus Measures

by Ship & Bunker News Team
Thursday April 9, 2020

No sooner did traders cause oil prices to rise again early on Thursday on the expectation the world's largest producers would agree to cut production than their expectations were fulfilled, with the Organization of the Petroleum Exporting Countries (OPEC) and its allies settling on an initial cutback of 10 million barrels per day (bpd).

However, the cuts were apparently not enough to assuage fears over how government-mandated coronavirus curbs have impacted demand, and as a result West Texas Intermediate fell $2.33 to settle at $22.76 per barrel, while Brent crude slipped 4.14 percent to settle at $31.48, after earlier hitting a high of $36.40.

OPEC+ will make the 10 million bpd cuts between May and June, and then enact 8 million bpd cuts from July to year end, followed by a reduction of 6 million bpd beginning in January 2021 and extending through April 2022.

Next up, energy ministers from the Group of 20 major economies will convene for their own extraordinary meeting on Friday to "foster global dialogue and cooperation to ensure stable energy markets and enable a stronger global economy," according to the G-20 presidency.

All of this caused Mohammad Barkindo, secretary general of OPEC, to remark, "Covid-19 is an unseen beast that seems to be impacting everything in its path: for the oil market it has completely up-ended market supply and demand fundamentals since we last met on 6 March."

Meanwhile, as mainstream media continues to focus on its virus death toll reporting instead of highlighting the emerging decline of infection and hospital admittance rates, a growing number of professionals believe the computer models that dictated the global economic shutdown were wrong - an argument supported by some of the most prominent modellers recently downgrading their numbers (in the case of the UK, from an initial calculation of 500,000 virus deaths down to 20,000).

Indeed, William Bennett, former secretary of education and director of the U.S. National Office of Drug Control Policy, reminded RealClear Politics readers earlier this week that "Our officials and media have warned us of 2 million deaths in the United States, then 200,000 deaths, then 100,000 to 240,000 -  this needs to stop: there have been a total of 68,000 coronavirus deaths worldwide."

However, countries such as Canada - where the energy industry has all but completely collapsed - are still relying on modelling to keep draconian 'control' measures in place: prime minister Justin Trudeau on Thursday warned Canadians that normality wouldn't return "full-on" until a vaccine is developed [which could take years, opposed to rapidly-developing treatments that could render the virus manageable] and that vigilance would have to be practised "for at least a year."

It's unclear whether these countries will take the advice of new Harvard research suggesting that multiple "intermittent" periods of physical distancing might be more effective for saving lives than  "strict" distancing measures.

Finally, the drug widely and successfully used by doctors in Europe to treat the virus - hydroxychloroquine - but that has been denied widespread use in other countries and dismissed by media pundits because it has not undergone clinical trials - is finally undergoing the first official clinical trial, the U.S. government's National Institutes of Health announced on Thursday.