Oil prices slumped this afternoon on the back of fears from investors that the record production cuts agreed yesterday would not do enough to stabilise global oil prices.
Benchmark Brent crude shed six per cent of its value, falling back below $30 a barrel, while West Texas Intermediate fell nearly seven per cent to stand at $20.86.
Despite commitments to cut oil production by nearly 20 per cent of the global total, the fall in price is a sign that analysts and investors alike are yet to be convinced that the worldwide glut will be reduced sufficiently in the coming months.
The alliance between oil producer cartel Opec and allies such as Russia will reduce production by 9.7m barrels, with the remainder of the cuts expected to be made gradually by countries like the United States.
However, these commitments, which are expected to amount to 19.5m barrels in total, will not be enough to make up the total shortfall, which has been estimated to stand between 25m and 30m barrels per day.
In addition, the cuts will not come into effect until May, further pushing the effects of the cuts downstream.
In a sign of the muted market reaction, prices were not boosted by the US today saying its shale output will fall at a record pace in April.
Ehsan Khoman, head of Middle East and North Africa research at Japanese bank MUFG, said no productions cuts would have sufficed “to offset the unprecedented drop in demand that we have been cataloguing in recent weeks”.
Oil prices have collapsed in 2020 due to the combination of a production war between Russia and Saudi Arabia and the plummeting demand for the substance due to the coronavirus outbreak.
The new Opec+ agreement has resolved the former issue, but prices, which have more than halved since the beginning of the year, failed to recover as had been hoped.