MANHATTAN (CN) — With most major markets closed for Good Friday, investors now wait to see if a long-anticipated truce to the oil-price war between Russia and Saudi Arabia will be finalized.
Late Thursday, OPEC announced its members conditionally agreed to cut production by 10 million barrels per day through June, gradually tapering off to 6 million barrels per day next year until April 2022.
The deal was conditional on the agreement by Mexico, not an OPEC member, to cut its production by 400,000 barrels per day, though the country had agreed only to a 100,000-barrel daily cut.
Energy ministers from the G20 are meeting Friday to work out the kinks, and reportedly the United States is agreeing to cut 250,000 barrels on behalf of Mexico to broker a deal.
Oil prices — which at one point had been up double percentage digits on Thursday — dropped after the news the deal was not completely finalized, with the Brent hitting $32 per barrel and the West Texas Intermediate hitting $23 per barrel.
Investors have kept a close eye on the oil price war, but many experts say prices won’t come back up until demand does, which is almost entirely contingent on an end to Covid-19-minded social distancing.
“I’m not convinced that the overall market is all that concerned about the Saudi-Russia deal,” Sheridan Titman, an energy finance professor at University of Texas at Austin, said in an email Thursday night. “The cut in oil output is unprecedented, but I think it was necessary.”
The few markets open in Asia had a mixed day Friday, with the Shanghai composite down 1 percentage point while the Nikkei in Japan rose nearly a percentage point. The South Korean Kospi had the highest closing, gaining 1.3%.
Equities have been bolstered by calming comments by U.S. Federal Reserve Chairman Jerome Powell, who said Thursday “there is no limit” to what the Fed can do to combat the economic fallout from the coronavirus and promising brighter days ahead.
“There is every reason to believe the economic rebound, when it comes, will be robust,” Powell said during a Brookings Institute webcast Thursday.
Still, some analysts predict dark times ahead. Economists at JPMorgan Chase predicted a 40% decline in U.S. gross domestic product for the second quarter of 2020, and an unemployment rate of 20% by the time April’s jobs numbers are released.
“The long-run destruction of the level of output is difficult to quantify, but likely quite large,” they wrote.
President Trump said during his daily press briefing Thursday that “the economy is just going to do very well” and that “we’re going to have a big bounce.”
More than 1.6 million people have been confirmed to have Covid-19, and about 97,000 have died worldwide, according to data compiled by Johns Hopkins University. In the United States more than 466,000 have been infected by the respiratory disease caused by the novel coronavirus, while almost 17,000 have died.