Global oil production to witness 20 Mln Bpd drop due to OPEC

  • Global oil production to witness 20 Mln Bpd drop due to OPEC

Global oil production to witness 20 Mln Bpd drop due to OPEC

The worldwide oil benchmark, Brent crude, wobbled on Monday, despite the historic oil production cut deal sealed by the Organisation of Petroleum Exporting Countries and its allies on Sunday.

This weekend's OPEC+ deal to slash production by 9.7 million barrels a day amounts to the largest coordinated cut in history, but the decision doesn't go into effect until May and is still dwarfed by the decline in oil consumption as the coronavirus pandemic keeps multiple countries in lockdown.

"This historic action will help almost 11 million American workers who are supported by the U.S. oil and gas industry". "Even after the tentative reopening of economies, it is still going to be quite challenging for OPEC to match their supply to the actual demand for oil". Oil prices ended up falling again on Tuesday, as did the value of Norway's currency, after widespread criticism that the cuts already agreed aren't big enough.

"The big Oil Deal with OPEC Plus is done", Trump tweeted on Sunday.

"Providing our storage for these US companies will help alleviate some of the stress on the American energy industry and its incredible workforce".

How significant is the USA involvment?

Will OPEC deal be respected? . The kingdom released May's prices earlier this week, deepening the discounts to most markets, especially Asia, where the cut was greater than expected.

WASHINGTON-Oil-producing nations reached an agreement over the weekend to reduce output by a record amount, ending a weeks-long price war between Saudi Arabia and Russian Federation that devastated oil markets.

What exactly did the United States bring to the table?

Trump said Monday that the cuts may be deeper than the headline figure - with top producers considering slashing output by 20 million barrels a day under the deal.

"But Yergin said: "(Trump) came to see this as a national security issue, also an employment issue, and a very important factor in the USA economy ... and he just jumped in". The U.S. was conspicuous as a hold-out on global output curbs, instead leaving it up to individual companies to steer production decisions.

The next major focus for markets will be numbers from the U.S. Department of Energy on its strategic petroleum reserves (SPR). "I think it will serve the president well on every count", including border issues, she said.

"If they lose that group of senators you start to see veto override majorities on legislation that deals negatively with the Saudis", Sullivan told a small group of congressional reporters. In brokering this deal, he proved that the U.S. President can still convene powerful countries around a table to make a deal.

Could force production cuts work in the US?

America's Energy Information Administration (EIA) forecasts that USA "crude oil production will average 11.8 million b/d in 2020, down 0.5 million b/d from 2019". But this grand bargain won't help oil producers as much as they would like.

According to Yergin, the national security implications of the price war on the US oil industry have prompted Trump to step in.

"We're not suggesting that Oklahoma can balance the market, we can't do that", said Mike Cantrell, owner of Cantrell Investments LLC, an oil and gas investment group based in Oklahoma. But statewide, production has declined about 20% this year, the equivalent of about 100,000 barrels a day - a cut similar to Mexico's. If sustained, "that would be a cut that would be a significant cut in the world scheme of things", he said.

In other words, the price war is still on for now.

US West Texas Intermediate crude was down 22 US cents, or 1 per cent, at US$22.19, after having dropped 1.5 per cent in the previous session. But that was still better than what some analysts had predicted - including a drop in the price to the single digits.

Goldman Sachs said it still expects oil prices to fall in the coming weeks as storage fills rapidly even as the OPEC and its allies (Russia) agreed to chop world supply.

What about low fuel prices? But most consumers aren't able to take advantage, because many are staying home to prevent the spread of the coronavirus.