Oil Prices Lose Gains After Deal on Production Cuts: Live Updates

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Oil prices rise, then lose gains after deal to cut output.

One day after oil-producing nations agreed to the largest-ever production cut, the reaction in oil markets on Monday was largely muted. Although prices briefly jumped at the start of trading, they eventually lost their gains.

Brent crude, the international benchmark was unchanged at $31.47 a barrel, while West Texas Intermediate, the main U.S. marker, was up 1.0 percent to $22.98 a barrel.

As large as the cut is — 9.7 million barrels a day, beginning in May, reflecting about 10 percent of global output during normal times — many traders and analysts have said it is insufficient and too late to avoid a huge glut of supplies in the current quarter.

There is also skepticism about the degree to which a wide range of countries will comply to the deal. Mexico’s success in reducing its proposed share of the overall cut from 400,000 to 100,000 barrels a day may well be repeated by other countries, some analysts said.

“It’s simply too late to prevent a superlarge inventory build of over one billion barrels,” wrote analysts from Citigroup in a note to clients on Sunday.

Still, the agreement marked an unprecedented coordinated effort by Russia, Saudi Arabia and the United States to stabilize oil prices and, indirectly, global financial markets. It will head off the huge production increases that Saudi Arabia and its allies were planning for earlier this month and, over time, is expected to help reduce inventories.

Saudi Arabia and Russia typically take the lead in setting global production goals. But President Trump — facing a re-election campaign, a plunging economy and American oil companies struggling with collapsing prices — took the unusual step of getting involved after the two countries entered a price war a month ago. Mr. Trump had made an agreement a top priority.

Analysts expect oil prices, which soared above $100 a barrel only six years ago, to remain below $40 for the foreseeable future.

“This is at least a temporary relief for the energy industry and for the global economy,” said Per Magnus Nysveen, head of analysis for Rystad Energy, a Norwegian consultancy. “The industry is too big to be let to fail.”

Airlines have canceled a staggering number of flights, but thousands still take off every day, leaving many of the people needed to keep them running to reckon with whether to continue working and how to stay safe if they do.

For Molly Choma, a flight attendant for Alaska Airlines, those remaining flights provided a financial cushion. After the pandemic halted the photography business she has nurtured on the side, she took on flights from colleagues who could not, or would not, staff them.

Already, hundreds of flight attendants and pilots have fallen ill and at least five have died from the coronavirus, according to to the labor unions that represent them.

Though the industry secured $25 billion from the federal government to pay employees through September, the future remains bleak. It took several years for passenger volume to rebound after the terrorist attacks in 2001, a shock less severe than the current crisis, which is seen by many as the worst in the history of aviation.

The uncertain future of the industry factored into Ms. Choma’s decision to keep doing what she has done since she became a flight attendant right out of college 11 years ago.

“I don’t know if it’s stupid or crazy, but I just feel like I’m supposed to be here doing this work, taking these five or 10 people where they need to go,” she said. “It’s like a guttural, instinctive reaction that this is what I’m supposed to be doing right now.”

Ever since the coronavirus pandemic forced thousands of traders, sales representatives, analysts, bankers and risk managers out of their workplaces and into their homes, the foot soldiers of finance have been making do with technology that’s far more ordinary than many of them are used to.

Two computer screens instead of four. Slower wireless connections. Plain old cellphones — missed calls and all — instead of a specialized telephone known as a “turret.” Instant messaging and video conferencing replacing quick bursts of conversation across a floor.

The individual inconveniences are relatively minor but together, they have had a noticeable impact on the functioning of markets, according to traders, investors and regulators. The rapid-fire, split-second nature of global trading has slowed slightly because communicating decisions takes longer. And that, in turn, has added a layer of unexpected friction to already volatile markets.

Companies invest heavily in technology and have elaborate setups meant to simplify communication between trading desks, analysts and clients. Milliseconds make a difference in this environment, because prices can change swiftly.

Troy Rohrbaugh, the head of global markets at JPMorgan Chase recalled how, one day in mid-March, when the market was swinging wildly, a large client needed to sell a significant chunk of bonds. Mr. Rohrbaugh, who was in his office at the bank’s Midtown headquarters, stepped onto the trading floor to confer with a couple of traders and a salesman.

“We were done and dusted and shelling a price to a client in two minutes, three minutes,” he said. “Can you imagine that conversation taking 30 minutes or longer in markets that are moving as rapidly as they are now?” He continues to work from the office despite a recent outbreak of the coronavirus there.

“It’s heartbreaking,” said Paul Allen, a co-owner of R.C. Hatton Farms, who has had to destroy millions of pounds of beans and cabbage in South Florida and Georgia.

Some farms have tried to donate crops to food banks and other charitable groups, but there is only so much perishable inventory that these organizations can absorb, with their limited numbers of refrigerators and volunteers. And many farms, already hurting financially, cannot take on the storage and transportation costs.

Farms are not well set up to sell into retail stores. The machines used by dairy processors, for example, are designed to package shredded cheese into large bags for restaurants, or put milk in small cartons for schools. Updating that equipment to make supermarket-friendly bags of cheese would require millions in capital.

Exporting much of the excess food is not feasible either, farmers say, because many international customers are also struggling through the pandemic and recent currency fluctuations make exports unprofitable.

Global markets began the week in the red on Monday, as signs of progress in fighting the coronavirus as well as the new oil deal between major petroleum-producing nations failed to soothe investors.

Stocks in Japan fell 2.3 percent, leading the declines. Futures markets predicted Wall Street would open lower as well. Major European markets were closed for the Easter holiday.

Investors on Monday were parsing the implications of the oil production deal between members of the Organization of Petroleum Exporting Countries and other major countries to trim output to put a floor on fuel prices. Low oil prices are generally good for the world economy, but the disruptions to the energy industry and to countries that depend on selling petroleum have unnerved investors. Oil prices rose earlier in the day then lost steam as European trading began.

Catch up: Here’s what else you need to know.

  • After slashing the majority of its trips domestically and abroad, United Airlines said it would add a few international routes next month. The carrier plans to start daily service on May 4 on three routes: Chicago to London, Newark to Amsterdam and Washington to Frankfurt. It also plans to offer three flights a week between Washington and Buenos Aires starting on May 5.

Reporting was contributed by Stanley Reed, Niraj Chokshi, David Yaffe-Bellany, Michael Corkery, Matt Phillips, Clifford Krauss and Carlos Tejada.

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