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As a result of the Corona crisis, the price of oil initially falls due to the collapse of demand and then plummets as a result of the open conflict between producing countries. But now a broad alliance is apparently succeeding in a deal that goes beyond the OPEC cartel to stabilize prices.
The path for OPEC and its partners’ historically unique strangulation of oil production is clear. In a special video session, the participating oil-producing countries agreed to a reduction of 9.7 million barrels (159 liters each) per day during the months of May and June, as the Mexican Minister of Energy, Rocio Nahle, said, and Kuwait’s oil minister, Chaled al-Fadhel. The Kazakh Ministry of Energy also confirmed the agreement, according to the Kazakh agency Tengrinews and the Russian agencies.
The amount is around 300,000 barrels per day below the original target decided on Friday. Mexico had refused to contribute the 400,000 barrels required to the end and held on to its offer to remove 100,000 barrels from production. The production cut corresponds to around ten percent of daily oil production worldwide.
Other countries such as Canada and the United States are expected to reduce production. Russian President Vladimir Putin telephoned his American colleague Donald Trump at night, as the Kremlin said. Russia, the United States and Saudi Arabia, therefore, support the agreement. The limitation could “stabilize world markets and ensure the sustainability of the global economy as a whole.” Talks about this should continue, he said.
Trump congratulates
Putin also spoke to King Salman of Saudi Arabia. Trump also wrote on Twitter that he had called Putin and King Salman on the phone. He thanks and congratulates them both. It is “big business for everyone”. The deal will also secure hundreds of thousands of jobs in the US energy industry. USA The rapid drop in prices had also raised concerns about the bankruptcy of the national oil industry in the United States.
So far it is unclear whether the round also confirmed targets for the period through April 2022. The round, called Opec +, focused on Saudi Arabia, agreed on Friday to cut production by eight million barrels of oil per day in July to December. Between January 2021 and April 2022, the daily production cut should amount to 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.
With the cut, OPEC + wants to stabilize the price of oil, which has fallen rapidly in the crown crisis. Oil prices had plummeted to their lowest level in 18 years in recent weeks. The reasons are the low global demand for the raw material due to mobility restrictions in the coronavirus pandemic and the price war between Russia and Saudi Arabia. It is still unclear whether the decision will cause gas prices at gas stations to rise again.
