Experts are Skeptical on Oil Strategy
CHURCH: OPEC and other oil producers will slash production by nearly 10 million barrels a day beginning in May. Oil prices jumped on the news, but analysts are worried it won't be enough to cut the oversupply. The energy market has been rocked by a price war between Saudi Arabia and Russia and the plunge in demand because of the pandemic. CNN's John Defterios joins us now from Abu Dhabi to talk more about this. Good to see you, John. So how difficult was it to get this deal done in the first place and, of course, what will be the consequences of this significant cut in production?</s>JOHN DEFTERIOS, CNN ANCHOR AND EMERGING MARKETS EDITOR: Well, it took three special meetings in a span of four days. That's how difficult it was, Rosemary, to build a consensus here. It is just below 10 million barrels a day which is two times more at the peak than the global financial crisis back in 2008 and 2009 when it had a slash production back then because of falling demand which is below 10 million barrels a day because Mexico was holding out. It is only going to cut 100,000 barrels a day. But the reality in the oil market today, Rosemary, is about over three billion people are locked down. They are not travelling. The trucks are not moving. Cars are not driving. This is dropping demand in such a severe way by at least a third. So the cut that the OPEC-Plus players put in is about 10 percent, states that it is going to be contribution from other countries like the U.S., Norway and Canada, which will add to that cut. They did not make that formal because of anti-trust concerns. And then we are going to see some of the industrialized countries buy oil at its lower price. To put it into the strategic reserve will show mop up stop on the excess demand. It is a victory in a sense because, you know, a week ago at this time, Rosemary, we were talking about the fact that Saudi Arabia and Russia wouldn't sit down together. So Donald Trump did service the bridge between the two to get this deal moving in the right direction.</s>CHURCH: And in the end, some are still asking, will this production can't be sufficient in the end? What is the word on that?</s>DEFTERIOS: Well, you know, Rosemary, focus is until the end of June. We know we are in a global recession and demands are going to be lower. But I did the math over a 6-month period. This deal lasts until April 2022, which is extraordinary in itself. It will mop up about two billion barrels of excess supplies. So that is extraordinary. It will help the market recover. But we are in a range right now -- the WTI, the U.S. benchmark is around $23 a barrel. We are down more than half from where we were at the start of the year. It is not enough for the U.S. shell, producers to survive. So what we saw play out over the last week here was a good cop, bad cop. Donald Trump bringing Russia and Saudi Arabia back together. They got the deal done. Abdulaziz bin Salman, the Saudi minister, makes sure everybody was lined up to make sure they had a deal before the market opens today. But a lot of pressure on Saudi Arabia coming from Capitol Hill, saying, if you don't get this deal, we're going to put tariffs on Saudi and Russia oil coming into the United States, maybe even hold back military sales to Saudi Arabia and pull back on the support we have been giving you against Iran. So, it's a tough game to get it there. It's done. Now, we have to see demand recovery here in the second half of the year.</s>CHURCH: Indeed. All right, many thanks to our John Defterios joining us there live from Abu Dhabi.</s>DEFTERIOS: Mm-hmm.</s>CHURCH: And when we come back, live from the couch. It's Saturday night. The iconic U.S. show goes on as comedians embrace their work from home lifestyle. We will be back with that in a moment.