OPEC Cutback Deal Hailed As Warding Off Disaster, While U.S. Moves Towards Reopening Economy

Meanwhile, coronavirus figures are dwarfed by those of Influenza A and B in 2020: File Image/PixaBay

Despite mixed crude trading Monday, emerging hope for the commodity's slow recovery was expressed due to the Organization of the Petroleum Exporting Countries (OPEC) and its allies finalizing an agreement to cut production by 9.7 million barrels per day (bpd), the single largest reduction ever.

The agreement ends a price war between Russia and Saudi Arabia that, along with world governments imposing draconian measures against citizens and businesses to slow the coronavirus, has caused crude prices to plummet.

Per Magnus Nysveen, head of analysis at Rystad Energy, told media, "This is at least a temporary relief for the energy industry and for the global economy.

"Even though the production cuts are smaller than what the market needed and only postpone the stock building constraints problem, the worst is for now avoided."

Dan Yergin, vice chairman of IHS Markit, credited U.S. president Donald Trump for orchestrating a deal that "goes two years, so it's also meant to manage the inventories downward over that period of time; what this has done is averted what really would have been a disaster for the oil industry and I think it does give some stabilization."

Ed Morse, global head of commodities for Citi, said the cut will have a significant impact in the second half of 2020 and help lift prices to the mid-$40s by year-end, but that there will be short-term pain while the market rebalances.

As always, crude traders were not completely reassured: West Texas Intermediate fell 1.54 percent to settle at $22.41 per barrel, but Brent rose 33 cents to $31.81 per barrel.

However, U.S. equity markets on Monday clawed back about half of their losses, and Optimal Capital suggested the market could even soon rally due in part to the coronavirus fiscal stimulus.

Meanwhile, all eyes were on Tuesday when the White House, governors, health experts and business leaders launch a task force aimed at reopening the economy; this comes as other countries such as South Korea consider easing social-distancing rules (this despite the virus 'reactivating in 116 patients, something doctors stress is not reinfection and not a case of the relapsed patients spreading the virus).

The growing push to restart the economy also comes as U.S. Surgeon General Dr. Jerome Adams said cases in some American hot spots - New York, New Jersey, Detroit, and New Orleans - appear to be "levelling off" or even declining, while the situations in California and Washington remain stable.

Also, the U.S. death count dropped over the weekend as did the number of infections, according to John Hopkins University: they now stand at a total of 22,800 and 560,000 respectively, compared to  between 39 million and 55 million Influenza A and B illnesses, at least 400,000 hospitalizations, and as many as 63,000 deaths so far this year, according to the latest Centre for Disease Control figures.