The executive director of the International Energy Agency (IEA) said the recent OPEC+ supply cut was a "solid start" and urged oil producer countries to consider even deeper cuts.
"We continue to see extraordinary turmoil in oil markets, including yesterday's unprecedented collapse in the US benchmark crude price (WTI). With global oil demand this month close to 29 million barrels a day below year-ago levels, there is currently massive oversupply, which is threatening to overwhelm storage capacity in the coming weeks," Fatih Birol said in a statement.
Birol recalled that the IEA last week described the current month as "Black April" for the industry and the historic OPEC+ supply agreement is due to take effect on May 1.
"But as the IEA highlighted in its monthly Oil Market Report on 15 April, the supply adjustments are insufficient to rebalance the market immediately because of the magnitude of the drop in demand resulting from the Covid-19 crisis," he added.
"The IEA has highlighted the severity of this unparalleled crisis to policy makers around the world – including those who attended the extraordinary meeting of G20 energy ministers on 10 April," the statement read.
Citing Birol's warning during G20 meeting that the rapid build-up of oil stocks was saturating logistical and storage capacity, which "may lead to more volatility and possibly even negative prices in some regions," the agency pointed to three suggestions.
The agency said those countries that made the recent decisions should reduce production act as soon as possible and also consider even deeper cuts.
The financial authorities should "consider adopting measures to discourage disorderly market outcomes," the agency added.
The agency also urged that the countries with strategic oil reserves to make capacity available to help take surplus barrels off the market.
WTI crude oil fell Monday into negative territory for the first time in history. The price of WTI under the futures contract, which expires Tuesday, fell to as low as -$37.63 by plummeting more than -290%, indicating that the massive oversupply against low demand is forcing suppliers to pay buyers to unload their inventory.
Brent crude oil dived below the threshold of $20 per barrel on Tuesday. It fell to as low as $18.02 per barrel, marking its lowest level since February 2002, at 0935 GMT for a 29.27% daily loss after it closed Monday at $25.48 a barrel.
OPEC+ oil producing nations agreed on April 12 to cut their total oil production starting from next month -- a decision that came a month late when they previously met in Vienna, Austria on March 6.
The one-month delay to curb output, on top of implementing cuts from May 1 onwards, has left the global oil market with an excess of supply to add to the glut, which in turn has dramatically pushed down crude prices.
By Sibel Morrow