Oil prices up 2% after output cut, but demand worries weigh

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OPEC, Russia and other oil producing nations unanimously agreed to cut output by a record 9.7 million barrels per day, around 10 percent of global supply, to support oil prices amid the coronavirus pandemic.

"If G20 adds about another 10 mln bpd, then the world is meeting the total imbalance from May and this would be a massive relief", Rystad Energy said.

Crude futures contango - the market structure in which later-dated prices are higher than prompt supplies - widened, highlighting some optimism over the longer-term impact of the Opec+ cuts but also current oversupply concerns.

Oil prices rose Monday after top producers agreed to massive output cuts, but gains were capped as doubts grew about whether the move was enough to stabilise coronavirus-ravaged energy markets. Alejandro Barbajosa, vice president of crude for Argus Media, a price reporting agency for the energy industry joins us from Tokyo to discuss the latest updates.

OPEC producers dominated by Saudi Arabia and allies led by Russian Federation again met by videoconference on Sunday to cement the agreement.

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The number of confirmed coronavirus infections in hospitals grew by 5% for the fourth day in a row and reached 90,676. More than 34,800 people have been evaluated, including almost 2,500 people on Friday.

"I am honoured to be a party of this historic moment and historic agreement", Saudi's Prince Abdulaziz bin Salman told Reuters.

Sylva, believes that the output cut will not make much difference to Nigeria because the country had already, in the review of the 2020 budget, rebased the production level down to about 1.7 million barrels per day. The producer group reached a deal following days of intense negotiations after Mexico declined to endorse the original agreement reached Thursday.

"Secondly, the importance of this decision is not limited by the 9.7 million barrels per day production cut in May-June by OPEC+".

"We're going to see a significant drop in production anyway from producers who can't make money producing", said Phil Flynn, an analyst at Price Futures group.

"Even if these cuts provide a floor to prices they will not be able to boost prices given the scale of inventory builds we are still staring at", Energy Aspects analyst Virendra Chauhan said, referring to fast-filling storage amid the slide in demand from end users. Governments have ordered residents to stay home to curb the spread, roiling markets and disrupting daily life.

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