OPEC, Russia, and other oil-producing countries have finalized an agreement on the biggest oil production cut to date in the hope of bolstering global prices that have collapsed due to the coronavirus pandemic and a price war, Reuters reports.
OPEC+, a group of 23 oil-producing countries that includes Russia, said late on April 12 that it had agreed to reduce output by 9.7 million barrels per day for May and June. The deal also calls for OPEC-Plus members to keep oil production reduced from the current level by 6 million barrels per day through April 2022.
“The big Oil Deal with OPEC-Plus is done,” U.S. President Donald Trump said in a tweet. “I just spoke to them… Great deal for all.” Declaring that the agreement “will save hundreds of thousands of energy jobs in the United States,” Trump also tweeted congratulations and thanks to Russian President Vladimir Putin and King Salman of Saudi Arabia.”
The Kremlin announced early on April 13 that Putin held a joint call with Trump and Saudi King Salman in which all three had expressed support for the deal. Moscow also said Putin spoke separately with Trump about the oil market and other issues.
According to a draft statement by OPEC-Plus seen by Reuters, the group expects total global oil cuts to amount to more than 20 million barrels per day, or about 20 percent of the global supply, starting on May 1. That includes contributions from non-members, steeper voluntary cuts by some OPEC-Plus members, and strategic purchases by the world’s largest consumers.
Still, the planned production cuts fall short of completely offsetting an estimated 30 million barrel-per-day drop in worldwide fuel consumption caused by the coronavirus pandemic.
The global oil demand has collapsed as coronavirus lockdowns have largely halted global travel and slowed down other energy-consuming sectors such as manufacturing. The global oil price rose about three percent in early trading on Asian markets April 13.
But market analysts expect the boost to be short-lived, saying the agreement appears to have failed to give investors cause for lasting optimism amid the ongoing coronavirus pandemic.
Russian Energy Minister Aleksandr Novak said early on April 13 that Russia and Saudi Arabia will cut their daily oil output by 2.5 million barrels each under the agreement.
