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OPEC+ to curb global supply of oil by 20% amid COVID-19 pandemic

Author : Pankaj Singh | Published Date : 2020-04-13 

OPEC, a petroleum exporting organization consisting of 13 nations, and its partner nations led by Russia, reportedly announced an agreement to decrease their output in order to manage the falling oil prices in the coronavirus pandemic. Stating that that they also had an unprecedented agreement with partner oil exporting countries, including the U.S., to reduce worldwide supply of oil by 20%.

Ongoing measures taken by various nations across the globe to stop the spread of COVID-19 have decreased the need for fuel and have consequently reduced oil prices. This fall in the oil prices has strained oil producers’ budgets and has massively affected the American shale market, which is more at risk to lesser prices owing to its higher costs.

The OPEC group, together with new allies knows as OPEC+, stated that it would decrease the oil output by 9.7 million bpd (barrels per day) for May and June, after negotiations that lasted four days and increasing pressure from President Donald Trump to stop the falling prices.

This oil production cut is over four times deeper than the earlier record cut that happened in 2008. After June, manufacturers would slowly increase the oil production, however, reduced production rate would stay till April 2022.

Speaking on the matter, U.S. President Donald Trump stated that the oil agreement with OPEC+ has been signed. This deal would help secure hundreds of thousands of energy sector jobs across the U.S. Trump also thanked Saudi King Salman and Russian President Vladimir Putin for helping the deal go through.

OPEC+ sources stated that they estimate total oil cuts to be over 20 million bpd, effective from May 1.

Oil demand has observed a massive drop of about a third due to the increasing advent of COVID-19 pandemic. On Sunday, Brent oil prices opened a bit below at about USD 31.30 per barrel, which is lower than half of what the levels were at the beginning of 2020.

Global oil production cuts would also have a contribution from non-members, deeper voluntary cuts by few OPEC+ members and strategic stock purchases by the largest consumers of the world. 

 

Source credit: https://www.moneycontrol.com/news/world/coronavirus-pandemic-opec-russia-approve-biggest-ever-oil-cut-to-support-prices-amid-covid-19-5137271.html

About Author

Pankaj Singh

Pankaj Singh

Endowed with a post graduate degree in management and finance, Pankaj Singh has been a part of the online content domain for quite a while. Having worked previously as a U.K. insurance underwriter for two years, he now writes articles for fractovia.org and other online portals. He can be contacted at- [email protected] | https://twitter.com/PankajSingh2605

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