OPEC+ Agrees To Cut 10 Million BPD For Two Months
…..As Mexico expresses reservation over deal
In an effort to stem the unprecedented fall in oil price occasioned by coronavirus outbreak across the globe, OPEC and its allies on Thursday reached a deal to cut global oil production by 10 million barrels per day.
The deal was reached as oil ministers from OPEC and non-OPEC oil producers held a virtual meeting on Thursday.
However, Mexico, a non-OPEC member has expressed reservations about the length of the agreement.
The 10 million barrels per day production cut will be for the months of May and June, the biggest organized crude oil production cut since the landmark ‘Declaration of Cooperation’ of December 10, 2016.
The OPEC Secretary-General Mohammad Sanusi Barkindo in his remarks noted that the oil industry has in recent times experienced an incredible contraction both in oil and prices and demand as a result of the COVID-19 pandemic.
Barkindo said, “Only one month ago at the meetings in Vienna, expected 2020 global GDP growth was 2.4%. Today, it is a negative 1.1%. It is incredible to think that the global contraction is far greater than that for the Great Recession of 2008-2009.”
He noted that no sector of the economy has been spared by the unprecedented situation. “For the oil market, it has completely up-ended market supply and demand fundamentals since we last met on 6 March. Our industry is haemorrhaging; no one has been able to stem the bleeding.”
“The outlook for non-OPEC supply growth in 2020 has also fallen by over 1.5 mb/d, although this is nowhere near the drop for oil demand.
“The OPEC Reference Basket has fallen from $52.7/b in March 2020 to below $20/b in early April, a decline of around 70%. We are all now seeing significant less revenue coming into our treasuries.
“This evidently has major consequences, with the limits of the market being tested on many fronts.
“We are likely to see further breaches in logistical capacity, ships, pipelines, terminals and processing units. And it is clear that available storage capacity is quickly filling up.
Thursday’s emergency OPEC virtual meeting held sequel to the resident Donald Trump’s pressure on Saudi Arabia and Russia to consider productions cuts as the impact of the coronavirus weigh heavily on economies, especially the oil industry.
Trump hinted that Dozens of US oil companies were facing bankruptcy due to the collapse in oil prices, stressing that could lead worldwide layoffs in the oil industry.
“The numbers are so low that there will be layoffs all over the world, there will be certainly layoffs in this country and we don’t want that to happen,” Trump said.
OPEC+ next meeting will be on June 10, 2020.