Oil prices inched higher on Monday after a historic deal by oil cartel OPEC and its allies to cut production caused investors to realize that 10 million barrels a day doesn't go far enough.

After four days of wrangling, the Organization of the Petroleum Exporting Countries, along with other nations including Russia, announced Sunday an agreement to cut output by 9.7 million barrels per day.

The move was designed to prop up the price of oil by limiting supply, since prices for crude have plummeted since the start of March, when a previous tentative agreement to cut production expired.

Oil prices around the world have plunged to their lowest levels in almost 20 years as oil-producing nations pumped as much as they could, drowning the market in more oil than it needed. Saudi Arabia and Russia will shoulder about half of the cut themselves, which was a key sticking point in negotiations.

"While Saudi Arabia had to compromise," said Halima Croft, an oil analyst with RBC, "it achieved the main goal of the price war in getting Russia to accept a 2.5 million-barrels-per-day reduction."

The price war also came at a time when the global economy was essentially shut down because of COVID-19, which exacerbated the lack of demand for oil.

Ten million barrels a day is roughly 10 per cent of the world's daily output, but it's only about half of the excess currently in the market, which is why the mini rally in prices didn't last.

The European oil benchmark known as Brent Crude was changing hands at $31.87 US a barrel. That's about one per cent higher than where it was before the deal was announced.

Richard Masson, chair of World Petroleum Council-Canada, says Ottawa needs to move soon if it plans to help producers, as companies face 'really tough decisions.' 0:55

The North American oil benchmark known as West Texas Intermediate, or WTI, was up by just 37 cents to $23.13 US.

"We continue to contend that it is critical for the producer group to turn off the tap in the midst of a colossal demand crash," Croft said.

The type of oil that comes from Canada's oilsands is known as Western Canadian Select, and its price has plummeted more than almost any other type during the tumult. WCS gained 20 cents to trade at $4.59 a barrel in the afternoon on Monday. At those prices, the oil is effectively not worth producing, which is why oil companies have started to stop pumping it, and more soon will.

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"We have to shut in production because there is no place to put the oil," Richard Masson, a professor at the University of Calgary, told CBC News in an interview. "We could have producers paying people to take their oil because they don't have a place to put it. This will be an unprecedented time for our country."

Kevin Birn, a Calgary-based oil market analyst at IHS Markit, says Canadian producers have already shut down wells accounting for about half a million barrels of oil per day, and he expects that figure to balloon to a million barrels soon.

"The scale and the scope of this agreement is really a big deal," said Birn. "It is unprecedented ... but sadly, the demand destruction we're seeing is even greater."