Oil Prices slumped in early trading session on Friday as investors were disappointed in the amount of production cut that OPEC and its allies agreed on 10 million barrels per day (bpd) instead of 20 million bpd.
WTI plunged $1.90/bbl or 7.57% to $23.19/bbl while Brent dropped $0.81/bbl or 2.47% to $32.03/bbl
Last night, oil prices spiked as much as 12% ahead of the announcement of production cut upon the report from Reuters that both Saudi Arabia and Russia reached a deal with a deep cut. Some were expecting a cut up to 20 million bpd, which was higher than the U.S. President Donald Trump had hoped.
However, the announcement of 10 million bpd at the end of the meeting destroyed investor hopes, believing that a 10 million bpd cut would not be enough amid a low demand in global, coupled with the outbreak of coronavirus which stopped all airlines from operations. Moreover, the group decided that the 10 million bpd cut would be only in May to June. Then the cut will be lower to 8 million bpd in July to December, and lower to 6 million bpd from January 2021 to April 2022, stated Reuters.
The production cut of 10 million bpd does not include other producers like America, Canada or Brazil. The Group of 20 will convene their own meeting on Friday to foster global dialogue and cooperation to ensure stable energy markets and enable a stronger global economy.