OPEC+ reaches historic supply agreement

OPEC+ members agreed to cut output by 9.7M b/d last week to offset falling demand from the coronavirus pandemic. The initial cuts of 9.7M b/d are for May and June, with cuts dropping to 7.7M b/d for the second half of 2020 and then 5.8M b/d from January to April 2021. The cuts are relative to production as of October 2018.

Despite these unprecedented cuts, they may be insufficient to balance the market, with oil analyst estimates of up to 20M b/d of demand loss in 2Q20.

There were no firm commitments to cutting production from any G20 countries outside of OPEC+ following their meeting on Friday. US shale production is forecast to fall by 183K b/d m-o-m in May to 8.53M b/d, according to the EIA Drilling Productivity Report. Production is expected to fall in all major shale basins, with the Permian declining by 75K b/d.