A week of high-stakes deal-making came up short Friday, as energy ministers from the Group of 20 (G20) industrialized nations decided against cutting oil production in a last-ditch bid to drive up prices.

By the time the ministers gathered by videoconference, prices had already “tumbled” on the expectation that production levels would not fall as far as some observers had hoped, the Globe and Mail reported. The North American benchmark, West Texas Intermediate (WTI) crude, levelled off at US$22.76 per barrel before markets closed for the Easter weekend, while Western Canadian Select landed at US$3.51, “far below any company’s ability to operate at break-even levels.”

The G20 ministers met the day after an “OPEC+” videoconference, including members of the Organization of Petroleum Exporting Countries plus Russia, agreed to cut production by nearly 10 million barrels per day in May and June, bringing an end to a price war between Saudi Arabia and Russia that had roiled global markets before the pandemic drove a spike through demand. The Globe and Mail initially identified Mexico as the only holdout, but the country appeared to be onboard by Sunday.

(Update: Late Monday afternoon, Reuters placed the total supply cut at 19.5 million barrels after factoring in decisions by other countries, yet the WTI price actually slipped 35¢, to $22.41, while the European benchmark Brent crude rose just 0.8%, to $31.74.)

“Saudi Arabia and Russia, the biggest producers in the group, will each take output down to about 8.5 million [barrels] a day, with all members agreeing to cut supply by 23%,” Bloomberg wrote, citing an unnamed delegate attending the meeting. “The alliance is seeking reductions of as much as five million a day from the G20, but will reduce output even if the bigger group doesn’t join in.”

“Both Saudi and Russia were going to have to cut anyway, and these cuts allow them to win political points too,” said Energy Aspects Chief Oil Analyst Amrita Sen.

But “while the headline cut equates to a reduction of about 10% of global supply, it makes up just a fraction of the demand loss, which some traders estimate at as much as 35 million barrels a day,” the news agency noted. Early reports had the OPEC+ plan calling for the production cuts to taper off after a couple of months, depending on the progression of the coronavirus pandemic. But on Sunday, CBC said OPEC+ expected the gradual recovery to take until April 2022.

“For oil markets, the massive oil demand contraction is unprecedented,” the global cartel said, in an internal document distributed to ministers and viewed by Bloomberg. “The current outlook looks extremely bleak, with oil markets anticipated to be severely tested on many fronts.”

A day later, the G20 offered little further relief, with Canada, Alberta and the United States all saying the price crash had already driven down their production. “The Saudi-led proceedings ended with just broad commitments to work collectively to provide stability to energy markets, and the decision to form a focus group to coordinate responses,” the Globe said.

(Saudi Arabia was chair of the energy ministers’ meeting since it holds the G20 presidency this year, placing it in the ironic position of having its own agenda held back through the same kind of international process it has used in the past to relentlessly obstruct global action on the climate crisis.)

“We implored upon all our colleagues to do what they could to achieve price stability,” Canada’s Natural Resources Minister, Seamus O’Regan, told media. “That’s something in everybody’s best interest. I think that’s something that came through very clearly among many participants in the G20 meeting today.”

“With production shutdowns, bankruptcies, layoffs, it’s absolute carnage,” added Alberta Energy Minister Sonya Savage, who attended the G20 session as an observer and indicated her province had not been asked to contribute production cuts. While the Saudi and Russian reductions will produce “an improvement in that situation,” she told the Globe, “it will still take a while to get the balance after we get out of COVID.”

Steve Wood, managing director of the oil and gas team at Moody’s Investor Services, said the OPEC+ cuts should support prices until demand picks up after the pandemic crisis eases. “However, the ultimate effect on oil prices will depend on the extent to which countries comply with their production cuts, as well as on the path of economic recovery and restored demand.”

“What it will potentially do is stave off the lowest potential price that we could’ve seen,” agreed Calgary-based IHS Markit analyst Kevin Birn. “Of course, the outcome of this remains to be seen in how well the producers adhere to it themselves, which has always been a traditional problem of any of these deals.”

While news reporting of the two meetings focused on the immediate implications for oil supplies and prices, Oil Change International had the bigger picture.

“The U.S. oil industry must come to realize that this bust is an extreme but not isolated event,” said Senior Research Analyst Lorne Stockman. “The transition under way in energy markets is already setting up the next bust, and many OPEC country leaders are aware of that. Now is the time to pursue a long-term, planned exit from fossil fuel production that avoids the chaos of the past few weeks, in contrast to the short-term goals of the current deal.”

“Recent weeks have been a case study in an unmanaged decline of oil, with workers and communities being hung out to dry while executives and shareholders line their pockets,” added Energy Transitions & Futures Director Hannah McKinnon. “This is a harbinger of what’s to come if governments don’t get their acts together and design recovery plans that phase out fossil fuel production in a way that is both just and equitable.”