On Thursday, OPEC, Russia and other allies announced plans to slash their oil production by more than a fifth and said that they were expecting the United States and other producers to join their efforts to boost prices hit by the coronavirus crisis.
OPEC+ said that the final agreement was dependent on Mexico signing up to the deal after it balked at the production cuts it was asked to make. On Friday, top-level energy ministers will resume this discussion.
OPEC+’s proposed supply curbs are 10 million barrels per day (bpd) or 10% of global supplies, with another 5 million bpd anticipated to come from other nations to help tackle the worst oil crisis in decades.
Global demand for fuel has reduced by about 30 million bpd, or 30 percent of global stocks, as measures to combat the epidemic have grounded flights, limited vehicle use and curbed economic activity.
An unprecedented 15 million bpd reduction would still not remove enough crude to avoid quick filling up of the world’s storage facilities. The United States President Donald Trump has intimidated Saudi Arabia because it resolved the issue of over-supply on the oil market.
As per the officials of the Organization of the Petroleum Exporting Countries and Russia, the scale of the crisis required the involvement of all producers.
The head of Russia’s wealth fund Kirill Dmitriev said, “We are expecting other producers outside the OPEC+ club to join the measures, which might happen tomorrow during G20.”
The meeting of OPEC+ will be held on a call on Friday which will be hosted by Saudi Arabia and attended by energy ministers from the Group of 20 (G20) major economies.
OPEC and Russian sources are expecting that the other producers will add 5 million bpd to the reductions, although there was no mention of any such requirement in an OPEC+ statement on Thursday.
OPEC+ documents revealed that the OPEC+’s production will be cut by 10 million bpd from May to June. All members will slash production by 23 per cent, with Saudi Arabia and Russia cutting 2.5 million bpd each, while Iraq cutting more than 1 million bpd.
Under the proposals, OPEC+ will ease cuts to 8 million bpd between July and December and further loosen them to 6 million bpd between January 2021 and April 2022, the documents revealed.
Moscow and Riyadh were at odds on the amount of production to be used to measure cuts after Saudi Arabia raised its output to a record 12.3 million bpd in April, up from below 10 million bpd in March. Meanwhile, Russian production has been operating at about 11.3 million bpd.
“We have managed to overcome differences. It will be a very important deal. It will allow the oil market to start on a path to recovery,” said Kirill Dmitriev.