The largest oil production cut in history was inked by OPEC and its oil-producing allies on Sunday , but many on the Street believe the deal still won't be enough to dent the drop-off in demand caused by the coronavirus outbreak. "Demand destruction is so dramatic that supply management is moot for the month of April 2020," Mizuho Managing Director Paul Sankey said Monday. "This overhang will take years to work off. The OPEC meeting gave you that answer, setting cuts through April 2022," he added. Oil's movement on Monday seemed to reflect the Street's cautious stance. West Texas Intermediate jumped more than 8% right out of the gate, before paring gains almost immediately. The contract ended the day 1.54% lower, extending Thursday's more than 9% decline. The deal, which will remove 9.7 million barrels per day from global supply beginning on May 1, was reached after marathon discussions that spanned four days. The cut, which is equivalent to roughly 10% of global supply, will remain in place through April 2022, although the amount taken offline will begin to taper in July. The cut may be the largest of its nature in history, but so, too, is the demand loss from the coronavirus. Travel has ground to a standstill and businesses worldwide have shuttered. More than one billion people across the globe are staying home in an effort so spread the slow of the virus. Goldman Sachs predicts that in April and May alone demand will drop by 19 million barrels per day. The demand loss already seen has sent oil prices to their lowest level in nearly 20 years. March was the worst month on record for WTI and Brent after each fell more than 50%. On Monday WTI settled at $22.41, far below the more than $60 it fetched at the beginning of the year. OPEC+ is counting on nations outside of the group, including the U.S., to also scale back on production in an effort to shore up prices. Trump has said that U.S. producers are already curbing production based on market forces. U.S. Energy Secretary Dan Brouillette reiterated this point on Friday during the G-20 energy ministers' meeting, saying that about 2 million bpd and perhaps 3 million bpd of U.S. production would have been taken offline by the end of the year. "The takeaway from the deal now that the ink has finally dried is that it is underwhelming but not a complete fail," Rebecca Babin, senior equity trader for CIBC Private Wealth Management, told CNBC in an email. "The consensus view is the deal is too little too late and that we will see tank tops in 2Q and lower prices in the near term," she added. That said, given the negative sentiment already priced in, she said downside may be "somewhat limited." The deal also puts to an end a price war that broke out between Saudi Arabia and Russia that broke out in March, which further pressured prices as each sought to gain market share. "Everything about the virus crisis is unprecedented, including this mega-deal, which six weeks ago could not have been imagined," said Daniel Yergin, vice chairman at IHS Markit. Here's what others on the Street are saying: "Unprecedented measures for unprecedented times" "While the production cuts that OPEC+ and G-20 countries are now implementing as of May 1 (and with some lagging thereafter) are massive and unprecedented, they will likely do little do stem a dramatic price collapse in the weeks ahead. However, they should equally dramatically positively affect fundamental balances and oil prices for the rest of the year, even if there is slippage on the producer side." Edward Morse, Citi "A historic yet insufficient cut" "Inland crude prices will decline further in coming weeks as storage capacity becomes saturated and expect further weakness in WTI timespreads and crude prices in coming weeks ... with downside risks to our short-term $20/bbl forecast." Damien Courvalin, Goldman Sachs "Global demand recovery path remains uncertain" "The demand implosion is immediate and deep, while the supply decline will likely happen in stages. As a result, the impact of the OPEC+ deal on the global oil balances could take a while to work through. The agreement ... is a huge response to an equally unparalleled global oil demand collapse." Francisco Blanch, Bank of America "Climbdown to a questionable deal" "The successful conclusion to negotiations is largely the result of OPEC countries climbing down from initial demands ... Versus expectations at the end of trading last week, we think the finalised agreement announced Sunday is a small disappointment, and we therefore see greater chance of modest selloff than rally." Michael Hsueh, Deutsche Bank "Economics outweighs ego" "We think there is one less worry for oil markets as economics overcame ego and the OPEC+ producers agreed to collectively support market fundamentals for several quarters. Risks to our price forecasts ($31/b and $37/b Brent for 2020 and 2021, respectively) are now skewed to the upside but near-term pressure remains." Amarpreet Singh, Barclays "Spitting in the Wind in 2Q, But Very Bullish 2021+" "While the OPEC+ deal cannot single-handedly keep oil prices from likely testing the $10/Bbl level over the next few months, it will certainly help in the latter half of the year, as COVID-related lockdowns are gradually loosened, global economic activity gets back to more normal levels, and oil demand stages what should be a V-shaped recovery." John Freeman, Raymond James - CNBC's Michael Bloom contributed reporting.
