Output cut of 10 million barrels per day (mbpd) during May and June and calibrated reduction in cuts in the months ahead as decided by OPEC+ under the leadership of Saudi Arabia is a small yet significant step to stem the rot in the crude oil market.
Although less robust than desired, it is surely a cushion for the market that has been reeling under burdensome inventory and humongous production unmatched by demand following slowing growth globally in the wake of the Covid-19 pandemic.
Inadequate measure
However, when one considers the demand destruction of 30 mbpd, the output cut is substantially less than what is necessary to prevent overflowing storage installations. For this reason, the crude market is unlikely to move too northward in a hurry.
