Oil Cuts Agreement

The reductions would be reduced to eight million barrels per day between July and December. They would then be loosened to six million barrels again between January 2021 and April 2022. Sunday`s agreement follows a busy week for oil ministers. On Friday, the Group of 20 held a separate virtual meeting to discuss the state of global oil markets, sparking speculation that further production cuts might be possible. (The G20 includes producers such as Canada and the United States who are not participating in OPEC reductions) However, the meeting ended without any new commitments announced publicly. OPEC, Russia and its allies were due to extend record oil production cuts until July on Saturday, after crude oil prices doubled in the past two months as efforts to withdraw nearly 10 percent of global shipments from the market. The talks were complicated by disagreements between Russia and Saudi Arabia, but on April 2, oil prices rose after President Trump said he expected the two countries to end their feud. However, an OPEC decision to extend production cuts could result in an excessive increase in deliveries before the end of the year. “The conversion of OPEC`s production cuts will result in a serious deficit in the global oil market by the fourth quarter,” said Leigh Goehring, managing partner of investment firm Goehring-Rozencwajg.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies agreed on Saturday to extend cuts in oil production by a month. The realization that the dark cuts are expected to last a month or more shows that, despite the recent surge in oil prices, major producers continue to fear that the oil market will disintegrate again. Many of the world`s leading oil producers agreed on Saturday to extend record cuts in oil production, which have helped support oil prices since they collapsed in April in the depths of the coronavirus pandemic. In April, OPEC first agreed to cut supply by 9.7 million barrels per day (bpd) between May and June to support prices that collapsed due to the coronavirus crisis. These reductions are expected to rejuvenate from July to December to 7.7 million bpd. Saudi Arabia and Russia agreed on Sunday with other oil-producing nations to cut production by 9.7 million barrels per day for the next two months to stem a drop in oil prices caused by the coronavirus pandemic and the feud between Moscow and Riyadh. “Through the grace of Allah, and then with wise leadership, continuous efforts and ongoing conversations since dawn on Friday, we now announce the conclusion of the historic agreement to reduce OPEC members` production by about 10 million barrels of oil per day from May 1, 2020,” Dr. al-Fadhel wrote in a tweet. Two OPEC sources said the group had already agreed to a one-month extension of the cuts made by its members.

Without extension, the reductions would be rejuvenated to 7.7 million barrels per day from July 1. OPEC meets on Saturday via video conference. According to the Wall Street Journal, the group is expected to complete a plan to extend current production cuts by July. The 23-member OPEC Oil Nations agreed on Saturday to extend the duration of the agreement by an additional month until the end of July 31. Opec, made up of oil producers and allies, including Russia, announced plans for the agreement on April 9, but Mexico opposed the budget cuts. “Any agreement on the extension of the cuts is conditional on countries that failed to fully comply with their cuts in May compensate for their overproduction,” the source said.

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