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OPEC and Mexico agreed to a cut agreement on Sunday night, but the price of oil still started to drop when trade started, then reversed again.
Saudi Arabian Energy Minister Abdulaziz bin Salman Al-Saud
SAUDI PRESS AGENCY / Reuters
published:,
The price of oil fell when trading started overnight, but around 02:00 the negative point had turned into an advantage.
Just after 02:30, the price of a barrel of North Sea oil (Brent spot) is at $ 32.46, a 2.08 percent increase from the close before Easter. The price of US light oil (spot WTI) rose 3.08 percent to $ 23.88 per barrel.
On Sunday night, it became clear that the oil group Opec +, with Saudi Arabia and Russia at the helm, had achieved a collective production cut of 9.7 million barrels per day in May and June. This corresponds to around ten percent of world oil production.
Demand falls more than cutting
Although a cut of 9.7 million barrels per day represents as much as about 10 percent of world oil production, the cut is considered by many to be too small. According to Rystad Energy, the demand for oil will drop to 28 million barrels per day in April and 21 million barrels per day in May, following the crown crisis. Therefore, despite the court agreement, there will still be an offer that is not in demand.
“OPEC + decided to try to rescue the world oil market, but unfortunately the group only received half of the bailout,” Bjørnar Tonhaugen, head of oil markets at Rystad Energy, wrote in a comment on Sunday night.
However, he points out that there may be positive signs for the price of oil a little later. The reason for this is that Opec + will continue to cut 6 million barrels per day in 2021, in which case it will be at a time when demand is expected to return to normal levels.
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– Although production cuts are smaller than the market needs and will only postpone the problem of full oil reserves, the worst is now avoided, writes Analysis Manager Per Magnus Nysveen at Rystad.
Mexico got what they wanted
On Thursday, OPEC + agreed to cut 10 million barrels a day for two months, but the deal has been at stake as Mexico would not cut as much as Saudi Arabia, which is considered the leader of OPEC.
Mexico proposed cutting 100,000 barrels per day, while Saudi Arabia asked for 400,000 barrels per day. After extensive negotiations in recent days, the oil countries have now agreed on the former.
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Before trading ended, DNB Markets analyst Helge André Martinsen stated that he expected a drop in the price of oil.
– It is reinforced (the fall in prices, note) by yielding to Mexico. Group morale weakens. There are quite a few countries here that will have to make dramatic cuts to low oil prices, and they will already basically have an economy that is in a difficult situation, Martinsen told E24 on Sunday night.
– Mexico is escaping cheaply. So the desire of the other countries to cheat with their cuts becomes great, Martinsen said.
