OPEC + of the oil cartel due to drastic cut in production – waiting for Mexico | 04/10/20

In light of the crown crisis, the OPEC oil cartel and its cooperation partners want to extract significantly less oil from the ground than in the past two years.

The round called heavyweight Saudi Arabia and Russia called OPEC + announced Friday after hours of negotiations a production cut of 10 million barrels (159 liters each) per day for May and June, corresponding to about ten per percent of the world’s daily production of crude oil. However, the group of states still lacks the approval of its member Mexico, which is mentioned as a condition for the agreement.

From July to December, according to the announcement, production will decrease by eight million barrels of oil per day, and between January 2021 and April 2022 by six million barrels. The production level was established in October 2018, and Saudi Arabia and Russia have their own starting level of 11 million barrels per day. It is precisely for this reason that it is not clear whether the decision will raise the price of oil and, therefore, also the prices at service stations.

However, a rapid cut of ten million barrels of oil per day and more seemed inevitable in the end, as the crown crisis and a price war between Saudi Arabia and Russia caused the price of oil to plummet. OPEC + now expects other major oil nations like the United States to extract significantly less oil from the ground than before.

The price of a barrel of Brent from the North Sea was almost $ 60 on February 19; On April 1, the barrel was only around $ 25. On Thursday, the price of Brent temporarily increased again to around $ 33, but fell again during the OPEC meeting. The ten million barrel deal, about which there was already a lot of speculation and rumors during the meeting, did not seem to be enough for the market in a first reaction.

Above all, the question of initial levels is complicated: in October 2018, OPEC + produced more oil than the previous one. At the end of March, the group had set a production limit: 2.1 million barrels less than in October 2018. At that time, Saudi Arabia produced around 10.6

Millions of barrels of crude oil per day, in February 2020 it was 9.6 million barrels. The kingdom can now calculate its cut of 11 million barrels. The devil is in the details, but for the market, the ad probably isn’t worth what it promises at first glance.

OPEC general secretary Mohammed Barkindo said in his opening speech on Thursday that the organization expects demand for crude oil to decrease by 6.8 million barrels per day in 2020. According to Barkindo, the decline in the second quarter is around twelve million barrels per day. “These are impressive numbers. Unprecedented in modern times,” said Barkindo.

At the OPEC + meeting in early March, Saudi Arabia and Russia still disagreed and could not agree on a common strategy. For years, OPEC + has been trying to stabilize the price of oil with production limits, but due to the lack of a new agreement, these restrictions expired in late March. Despite Corona’s emerging crisis, the fighters began production and quickly brought the price of oil to the basement.

To be able to raise the price again with production cuts in the face of the global virus crisis, the 23 OPEC + countries await the help of other countries; after all, the cartel does not want to bear the burden alone. Canada and Norway recently expressed interest in a joint strategy, the Scandinavians also participated in lengthy OPEC + consultations. The Organization of African Petroleum States (APPO) also offered a demonstrative position behind OPEC + on Thursday.

A G20 energy ministers conference call is scheduled on Friday, in which the future of the oil market is also likely to play a role. The deciding factor is probably the reaction of the United States. President of the United States Donald trump Recently, he had been very reluctant to reduce crude oil production in his country. On Thursday (local time) he said he was with the Russian President Vladimir Putin and had a “very good conversation” with Saudi King Salman, in which OPEC + consultations were also discussed. The ball is now with him, Trump.

A reduction in crude oil production by ten million barrels per day would correspond to approximately ten percent of total world production before the Corona crisis. The share of the 13 OPEC countries in the world oil market has recently been just under 30 percent, along with the ten cooperation partners (“OPEC +”) at around 45 percent.

/ nif / DP / fba

VIENNA (dpa-AFX)