BROOKINGS | The OPEC+ group came to a difficult agreement this weekend to cut 9.7 million barrels per day (bpd) in oil production. A long standoff with Mexico delayed the agreement and the group ultimately agreed to cut Mexico’s contribution to reach agreement. This level of production cuts is unprecedented, but so is the situation that brought it about. The COVID-19 pandemic prompted a nose-dive in global oil demand. Data about demand is difficult to obtain in real time, but IHS Markit (full disclosure, a former employer of mine) says that demand is down about 25 million bpd, or 25%. To contain the virus, many countries are in a state of near lockdown. Stay-at-home orders and the resulting economic slowdown are gutting demand for transportation, which makes up 60% of oil demand.
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