The price of West Texas Intermediate crude oil teetered even lower April 13 to $22.41 per barrel, a clear indication that the OPEC+ agreement reached over the weekend to reduce production would not be enough to counter demand destruction.

The deal, which would take at least 9.7 million barrels of oil per day off the market, was considered by many analysts to be far from enough given the dramatic drop in demand caused by the COVID-19 virus.

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"The supply adjustment will be seen as insufficient against a global demand decline of as much as [approximately 20 million bbl/d] based on early April figures," Deutsche Bank said in an April 13 commentary. "This decline could only mathematically coexist with OPEC's estimate of a [approximately 12 million bbl/d] demand decline over the whole of [the second quarter of 2020] if social distancing measures are meaningfully scaled back by mid-May or June."

Bernstein Research stuck a similar tone, also calling the reductions "insufficient" in the face of the unprecedented collapse in demand. The firm also expressed skepticism that OPEC member states will stay true to their word when it comes to cutting production.

The analysts said OPEC and Russia will see demand destruction of 10% to 20%, or between 1 million and 5 million bbl/d. "The fall in exports will therefore not be proportional to the cut in production," the firm said. "Compliance is a major risk. Once countries realize that oil prices are not rising on the back of production cuts, their commitment to cuts could be limited."

IHS Markit took a more optimistic view of the agreement, saying it believes predicted cutbacks by producers in the United States and Canada, as well as a handful of other countries, could pull as much as 14 million bbl/d off the market by May. The projections of a 20 million bbl/d crash in demand, the firm said, will likely spur a push for further reduction, which, unlike in March, will likely find universal support.

"Stepping away from a destructive price war, the return to market management by Saudi Arabia and Russia backed by the United States and a very involved President Trump, marks a physical and psychological inflection point for the oil market," IHS said.

'Nothing works now' for US producers

Unconventional producers in the U.S. have probably taken the largest beating in the most recent oil price collapse, with most independents slashing their budgets by 30% or more. With the supply-demand equation still pointed in the wrong direction for oil and gas companies after the announced cuts, things will likely get worse.

"The US unconventional revolution made for abundant supply and allowed the market to hit 100 [million bbl/d]. By extension, the apparent destruction of the US supply boom should structurally reduce the size of the market," Mizuho analyst Paul Sankey wrote April 13. "The bigger concern is that structurally reducing US oil activity will structurally reduce US GDP growth, and that will reduce world GDP growth, and therefore we will never return to that 100 [million bbl/d]."

Oil prices in the low $20/bbl range is far worse than the worst-case scenarios producers had at the start of 2020, which called for prices twice that amount. Now, many may be facing the unsavory prospect of cutting back on production severely.

"Nothing works now," Carl Marks Advisors Managing Director Brock Hudson said. "There's not a well you can drill. There were times when you could make a lot of money at $20/bbl, but that's not the case now."

Hudson said the situation is even more difficult for producers due to the uncertainty caused by the COVID-19 virus. Not knowing when, or if, demand will pick up has left companies with no clear path forward. "The big wildcard is, how long does this whole shutdown last? There's no demand at all … and I'm not sure how long it'll take for that to turn around," he said.

The S&P Oil & Gas Exploration & Production index traded up about 1% on a day April 13 when broader markets fell slightly.

'Getting together to stay alive'

When producers needed outside funding in the oil and gas price collapse of 2014 to 2016, banks and private equity came to the rescue. This time, Hudson noted, very few funding sources are likely to come off the sidelines. That, in turn, will lead to more M&A activity, which could be acts of desperation.

"It won't be any M&A that will be fun and exciting; it will be like two drunks holding each other up. These guys will be getting together to stay alive," Hudson said. "What it'll look like, I don't know, but there will be fewer bigger players."

Price Futures Group analyst Phil Flynn said the production cuts on the horizon would not cure the ills U.S. producers are now enduring but could stave off disaster.

"It might not be enough to save the day, but I think it's going to be enough to buy the industry a little time so they can forestall some bankruptcies and avoid some of the worst-case scenarios that people were talking about," Flynn said. "These cuts will keep prices from dropping to single digits, which would have been devastating to producers around the world. I think it will allow the market to heal a little bit. It's going to buy us some time as economies start to open back up."

Ellie Potter contributed to this story.