Oil prices rose over 1% Tuesday after the main U.S. energy forecasting agency forecast shale production in the world’s greatest crude producer would plunge by the most on record in April, adding to reductions from other main producers.
Brent LCOc1 futures surged 1.7% (53 cents) to $32.27 a barrel after ending 0.8% higher Monday. U.S. West Texas Intermediate crude CLc1 was up 1.4% (32 cents) at $22.73, having dropped 1.5% in the previous session.
The Organization of the Petroleum Exporting Countries, including Russia and other producing nations – known as OPEC+ – agreed over Easter to reduce production by 9.7 million barrels per day (BPD) in May and June, equal to about 10% of worldwide supply before the virus outbreak.
The U.S., the world’s largest producer, is cutting production as well, and other nations are taking the estimated cut in production to about 19.5 million BPD.
However, analysts, oil sector executives, and others say no matter how the numbers are massaged, the reduction is not going to be enough to match a contraction of around a third of global oil demand because of the outbreak.
Inventories, where available, are anticipated to refill quickly even as some nations among the G20 agreed to purchase oil for their national stockpile.