Crude finds support after latest OPEC+ deal, but doubts remain

Singapore — 0210 GMT: Crude oil futures were higher in midmorning trade in Asia Monday after an OPEC+ agreement inked Sunday, even though analysts remained skeptical of whether the supply cuts could balance out the market.

At 10:10 am Singapore time (0210 GMT), June ICE Brent crude futures rose $1.34/b (4.26%) from Thursday's settle at $32.82/b, while the NYMEX May light sweet crude contract rose $1.17/b (5.14%) at $23.93/b.

OPEC+ locked in a historic oil supply accord Sunday after Saudi Arabia, under pressure from the US, agreed to give Mexico a looser production quota.

The deal would see the OPEC+, a coalition of OPEC and other oil producers, reining in 9.7 million b/d of crude oil production for May and June -- down from the 10 million b/d originally envisaged late last week,

Mexico was allowed out from 300,000 b/d of its proposed cut commitment and will instead cut 100,000 b/d, and then reconsider its continued participation in the pact, according to sources involved in the talks.

The cuts are aimed at backstopping the market's slide as the coronavirus outbreak continues to erode global oil demand, but analysts said that this may not be enough to stabilize the market.

"Across market, the bigger issue remains demand as COVID-19 shocks continue to linger while the cut also takes place from a markedly higher production level prior to the price war," said IG market strategist Pan Jingyi Monday.

"With the likes of the IEA looking to a 20mbpd drop in global oil demand and that sitting towards the lower end of various forecasts, it may be a slow crawl for prices," Pan added.

The IEA said earlier that crude oil demand may fall as much as 20 million b/d amid the COVID-19 pandemic.

"With a demand shock estimated at between 15 [million] to 30 million barrels of oil a day, depending on who you talk to, it is clear that the OPEC+ agreement contains more hope than reality," said OANDA's senior market analyst Jeffrey Halley Monday.

"The entire construction is underwhelming, to say the least, and really relies on production collapsing in the US and Canada to deliver the level of cuts required," Halley added.