NEWS

Oil prices shed more than 10% on Tuesday, with investors apparently unconvinced that record supply cuts could soon balance markets pummeled by the coronavirus pandemic, though a predicted plunge in U.S. shale output provided some support.

Global oil producers worldwide are expected to cut overall output by roughly 19.5 million barrels per day, or nearly 20% of world supply.

However, those commitments – which include voluntary cuts that will happen gradually in places like the United States – will not be enough to reduce the growing worldwide supply glut. Oil prices remain more than 50% down this year.

“With demand destruction forecasts ranging from 15 million to 22 million bpd in April 2020 and these measures not even coming into place until May, we are likely to see a substantial overhang in the short-term,” said Nitesh Shah, director of research at New York-based WisdomTree Investments.

The bulk of the mandated reductions come from the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+. That group agreed this weekend to cut output by 9.7 million bpd in May and June. The rest from the United States, Canada and others, will come as a result of weak pricing and happen over time.