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The oil-producing countries (OPEC) pact, Russia and other oil-producing countries have reached an agreement to jointly pump 10 percent less oil. The objective of the agreement is for the price of oil to rise again.
From May 1, production will drop by 9.7 million barrels per day, until June 30. Even after that, the oil tap remains closer than it is now. In the second half of 2020, production will decrease by 7.7 million barrels.
Oil fight in Russia and Saudi Arabia
Ultimately, countries have agreed to pump 5.8 million barrels by April 30, 2022. October 2018 production is the starting point for all countries, with the exception of Saudi Arabia and Russia.
These two countries are to blame for the abundance of oil on the world market, resulting in very low prices. Because the Russians did not want to cut production after a call from the Saudis in early March, Saudi Arabia increased production. Russia did the same.
Currently, both countries are pumping around 12 million barrels, trying to hit the other country with the low price of oil in their finances. Due to this unprecedented production boost, the starting point for these two countries is 11 million barrels per day.
Happy Mexico and United States
The historic deal, such a significant cut has never been agreed, has not been achieved without a fight. The negotiations lasted from Thursday until last night.
Mexico has been a problem for a long time, but finally accepted the production restriction after, among other things, a compensation offer from the United States. The country, a relatively small producer, was supposed to deliver 400,000 barrels in the original plan, but did not want to go beyond 100,000.
The President of the United States, Donald Trump, applauded the agreement via Twitter last night. “This saves hundreds of thousands of jobs in the US energy sector,” he said. A low oil price is very unfavorable for US oil producers. USA Because shale oil extraction is relatively expensive. Incidentally, the United States is not a member of OPEC.
Trump also thanked and congratulated his Russian colleague Vladimir Putin and Saudi King Salman. Moscow and Riyadh were also satisfied with this solution, which they believe will bring stability to the oil market.
It’s enough?
The big question is whether it will be enough to prop up the price of oil. He had been in a free fall since the conflict broke out. Analysts have doubts about whether the OPEC deal with Russia goes far enough. Due to the global corona crisis, there is much less demand for oil, because there is less driving and factories produce less.
The price of oil rose last night and is currently also at the plus in futures trading on Wall Street. But the price of both a barrel of US oil and Brent is more than half that of the beginning of the year.
