OPEC+ is responding to the oil market’s collapse with an urgency never seen before. The alliance’s program of production cutbacks this month is well on the way to trimming 9.7 million barrels of daily crude output — roughly 10% of global supplies, according to tanker-tracking data, interviews with physical crude traders and refiners, and assessments by consultants. And that’s just in the first two weeks of the agreement.
Despite skepticism over the efficacy of the measures unveiled in mid-April by Saudi Arabia, Russia and their partners, compared to the immense hit to demand, the impact has been substantial. Oil prices have recovered by 60% in the past three weeks, as a pick-up in fuel use is complemented by the supply cuts.
Much of the prodigious effort undertaken by the Organization of Petroleum Exporting Countries and its allies has been unavoidable. With a dearth of buyers and storage, they’ve had little choice but to slash production. Saudi Arabia has been forced to reverse the massive output increases made in April, when Riyadh was waging a vicious battle for market share with fellow OPEC members. And the kingdom has come under immense political pressure from allies in Washington to shield the U.S. oil industry.