NEW YORK (Reuters) – Oil prices dipped on Thursday, giving back an earlier 10% surge as investors awaited details on a massive OPEC supply-cut agreement in response to the global fuel demand collapse due to the coronavirus pandemic.
A global lockdown to slow the spread of the coronavirus pandemic has cut fuel demand by about 30%, sending oil prices into free-fall.
The Organization of Petroleum Exporting Countries, led by Saudi Arabia, along with allies including Russia – a group known as OPEC+ – were working on Thursday on record oil output curbs of 15 million to 20 million barrels per day (bpd), or 15% to 20% of global supplies, to support prices hammered by the coronavirus crisis, OPEC and Russian sources said.
However, analysts said any agreement between oil producers may not be enough to offset the heavy build in supply due to falling demand, forcing even more production cuts. U.S. gasoline demand has fallen by nearly half since mid-March alone, and other nations have reported similar declines.
“Until the extreme social distancing/economic shutdown measures are significantly relaxed across North America, Europe and parts of Asia, any OPEC+ supply cuts are simply playing catch up at best,” said Roger Read, senior energy analyst at Wells Fargo.
Brent LCOc1 futures fell 19 cents to $32.65 a barrel by 1:42 p.m. EDT (1742 GMT), while U.S. West Texas Intermediate (WTI) crude CLc1 fell 22 cents to $24.89 a barrel.
Earlier on Thursday, prices jumped more than 10% as OPEC+ appeared to agree to cut output, although details remained unclear.
A cut of 20 million bpd would be by far the biggest output cut ever agreed by OPEC, but Russia has insisted it will only reduce output if the United States joins the deal. Other large producers like Canada and Brazil have already voiced support for cuts, though those nations are cutting output now due to market forces.
The United States has not said it will mandate output reductions. Instead, it has noted that market forces are already causing producers to pull back, as it expects its output to fall by nearly 2 million bpd by next year.
Further evidence of the pullback came with weekly figures on U.S. rig counts, which fell by 58 this week to 504, dropping to their lowest levels since December 2016.
Oil importing countries, meanwhile, may announce crude oil purchases, International Energy Agency Executive Director Fatih Birol told al-Arabiya TV.
Following the OPEC+ meeting, energy ministers from the Group of 20 major economies are set to meet on Friday.
The last OPEC meeting in early March ended acrimoniously, with Russia and Saudi Arabia unable to come to an agreement to curb output as the virus spread, adding to the slump in prices.
Additional reporting by Liz Hampton in Denver, Shadia Nasralla in London, Sonali Paul in Melbourne and Seng Li Peng in Singapore; Editing by Marguerita Choy and Raissa Kasolowsky