Even a production-cut agreement of 10 million barrels of oil a day for two months by Saudi Arabia and Russia wasn’t enough to boost oil prices on Thursday.
West Texas Intermediate crude dropped $2.33 before finishing the day at $22.76 a barrel while Brent crude fell 81 cents and ended the day’s trading at $32.03.
Natural gas was down a nickle at $1.73 per million Btu.
The agreement did not have the full approval from OPEC as Mexico, Brunei and Kazakhstan were holdouts. It came out of a virtual meeting where OPEC outlined a deal to cut production by 10 million barrels of oil a day, far short of the 35 million demand sought and expected by U.S. producers and others in the wake of the Coronavirus pandemic.
It was described as the biggest supply deal in OPEC history and about 10 percent of demand before the coronavirus hit the world. Under the agreement, the cuts will slowly end in April 2022. Russia and Saudi Arabia plan to cut about 5 million barrels a day between them while other OPEC producers will remove another 5 million barrels a day.
The flood of OPEC oil decimated some U.S. producers, forcing them to suspend drilling operations and slash their 2020 capital expenditures budgets by as much as 50% in some cases. Before the onset of the pandemic, worldwide oil demand approached 100 million barrels a day but plummeted by nearly a third as countries put a hold on travel and ordered stay at home or shelter at home orders for their people.
Full details of the OPEC agreement are expected to be revealed Friday after the G20 meeting. There are reports that the G20 nations will be asked to buy cheap oil for their strategic stockpiles, thus increasing demand. The question remains whether the 10-million barrel a day cut in production is enough to revitalize oil prices in the U.S. and many analysts aren’t optimistic about such a result.
The agreement appeared to have little effect on Oklahoma energy companies with the exception of ONEOK where shares rose $1.99 before finishing the day at $28.40 per share.
American Electric Power was up again, rising $3.01 a share to reach $86.31.
SandRidge Energy was off 2 cents at 82 cents a share while Chesapeake Energy dropped slightly to remain at 17 cents. ConocoPhillips closed down 95 cents at $34.72 while Devon Energy added 26 cents to reach $9.67.
Marathon Oil gained 17 cents and finished at $4.12 a barrel.