VIENNA/WASHINGTON (MaceNews) – The OPEC-plus group of major oil producing countries – the oil cartel’s members as well as Russia and Mexico – hammered out a tentative deal Thursday, in a marathon negotiating session, to slash their oil output levels collectively by 10 million barrels per day.
Saudi Arabia and Russia, the primary combatants in the price war that helped decimate oil market conditions, have agreed to cut about 5 million bpd between them in May and June. The remaining OPEC-plus producers agreed to remove an additional 5 million bpd.
The cuts would be scaled back between July and December to 8 million bpd, and then eased further to 6 million barrels between January 2021 and April 2022.
OPEC has yet to release an official statement confirming details of the agreement, with Mexico said to be the lone holdout.
G20 energy ministers will meet Friday, and as the current holder of the rotating G20 presidency, Saudi Arabia is expected to urge members, including the U.S. and Canada, to also cut oil production by 5 million bpd as well.
In remarks to open the talks, OPEC Secretary-General Mohammad Sanusi Barkindo noted the significant impact the coronavirus pandemic has had on oil markets since the group last met in early March. “The supply and demand fundamentals are horrifying; the expected excess supply volumes on the market, particularly in the 2Q20, are beyond anything we have seen before,” he said. “There is a grizzly shadow hanging over all of us. We do not want this shadow to envelope us. It will have a crushing and long-term impact on the entire industry.”
“Our industry is hemorrhaging; no-one has been able to stem the bleeding,” Barkindo continued. On the demand side, OPEC expects global consumption to decline by at least 12 million barrels per day, while oversupply would add an additional 1.3 billion barrels to global crude oil inventories, using up the available global storage capacity within the month of May, he warned.
So with around 15% of global oil consumption evaporating in Q2 alone, “this huge market imbalance needs to be urgently addressed,” Barkindo said.
In his opening remarks, Russian Energy Minister Alexander Novak confirmed intensive talks with his Saudi Arabian counterpart in the run-up to the conference.
“We observe a very serious decrease of demand for oil in the world – by 10 to 15 million bpd – and in the near future it can change further,” he said in televised remarks, adding that the rapidly growing reserves are also of concern.
Novak called for joint and urgent measures by all oil-producing countries. “In the current situation we would consider it to be justified to increase the number of countries taking part in in the stabilization efforts … Only by joint coordinated efforts can we achieve results in the interests of our nations,” he said.
However, in an interview on Bloomberg TV as the meeting was underway, U.S. Energy Secretary Dan Brouillette staked out the Trump administration’s preference for organic, market-driven reductions to deal with the oversupply in the oil market, and significantly reduced demand due to the coronavirus pandemic.