Season of plenty for oil... Opec's production cuts will come into effect from next month. But it will be tough task for these cuts to make a dent in a global economy awash in crude supply. Pictured here are marker points for the Transneft pipeline in Russia. Image Credit: Bloomberg

New York Oil could end the week below $20 a barrel for the first time since 2002 after a wave of gloomy demand forecasts suggested that a deal among the world’s biggest producers to curb output won’t be sufficient to sustain a price rally.

Futures in New York were slightly firmer, after closing below the $20 level for a second day on Thursday, to pare the weekly drop to about 12 per cent. OPEC said that it expects demand for its crude to fall to the lowest in three decades as the coronavirus outbreak freezes the global economy.

The producer group and its allies have agreed to curb output by 10 per cent next month, but even with full compliance, the market is still likely to be oversupplied in the second quarter.

Inventories from America to Europe and Singapore have all ballooned this week, sending some localized crude prices below $10 a barrel. The glut is looking so severe that the Trump administration is considering paying American companies to leave crude in the ground.

60 %

What benchmark Brent crude prices have dropped by this year

The stock builds come as the International Energy Agency said that 2020 may be the worst year in the history of the oil market as lockdowns globally lead to the biggest hit to demand ever. The Brent global benchmark has collapsed by almost 60 per cent this year as the market factored in the unprecedented demand destruction caused by the virus.

ConocoPhillips is the latest energy major to announce deep cuts to its operations, slashing more than one-fourth of its North American production and halting all US fracking in the continent’s largest pandemic-related oil cutback to date.