On April 9, OPEC, led by Saudi Arabia, was joined by Russia and other major global producers in an agreement to take a record amount of crude oil production off the market. The 10 million-barrel-per-day reduction in output the participants agreed to is a massive change in course and will help establish some stability in a global oil market that's in turmoil. And if there's anything the oil market needs right now, it's a big, stiff shot of stability.
However, even taking 10 million barrels per day -- which works out to roughly the average daily production of Russia or Saudi Arabia before they increased output in April -- simply won't do enough. We are facing unprecedented levels of demand destruction under COVID-19 restrictions, and the oil patch is headed toward a brutal 2020 and potentially beyond.
Oil stocks have crashed as a result, falling far lower than the rest of the stock market, even after its recent rebound. Strong integrated super-majors like ExxonMobil (NYSE: XOM) and Royal Dutch Shell (NYSE: RDS.A)(NYSE: RDS.B) are down around 40%, while independent oil producers Occidental Petroleum (NYSE: OXY) and Chesapeake Energy (NYSE: CHK) -- both of which entered the oil downturn with problems -- are down 81% and 68% from their pre-crash highs.