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Monday, July 13, 2020

OPEC allied nations extend nearly 10M barrel cut by a month

However danger still lurks for the market Algerian Oil Minister Mohamed Arkab the current OPEC president warned attendees that the global oil inventory would soar to 15 billion barrels by the midpoint of this year

By: AP | Dubai | Updated: June 6, 2020 10:34:36 pm
OPEC nations, OPEC nations oil cut, oil cut OPEC nations, oil barrel price OPEC nations, Business news, Indian Express Despite the progress to date we cannot afford to rest on our laurels Arkab said The challenges we face remain daunting. (Representational image, source: Reuters)

OPEC and allied nations agreed Saturday to extend a production cut of nearly 10 million barrels of oil a day through the end of July hoping to boost energy prices hardhit by the coronavirus pandemic

Ministers of the cartel and outside nations like Russia met via video conference to adopt the measure aimed at cutting out the excess production depressing prices as global aviation remains largely grounded due to the pandemic It represents some 10 of the worlds overall supply

However danger still lurks for the market Algerian Oil Minister Mohamed Arkab the current OPEC president warned attendees that the global oil inventory would soar to 15 billion barrels by the midpoint of this year

Despite the progress to date we cannot afford to rest on our laurels Arkab said The challenges we face remain daunting.

That was a message echoed by Saudi Oil Minister Abdulaziz bin Salman who acknowledged we all have made sacrifices to make it where we are today He said he remained shocked by the day in April when US oil futures plunged below zero

There are encouraging signs we are over the worst he said

Russian Energy Minister Alexander Novak similarly called April the worst month in history for the global oil market

The decision came in a unanimous vote UAE Energy Minister Suhail alMazrouei wrote on Twitter He called it a a courageous decision and a collective effort deserving praise from all participating producing countries

Crude oil prices have been gaining in recent days in part on hopes OPEC would continue the cut International benchmark Brent crude traded Saturday over 42 a barrel Brent had crashed below 20 a barrel in April

The oil market was already oversupplied when Russia and OPEC failed to agree on output cuts in early March Analysts say Russia refused to back even a moderate cut because it would have only served to help US energy companies that were pumping at full capacity Stalling would hurt American shaleoil producers and protect market share

Russias move enraged Saudi Arabia which not only said it would not cut production on its own but said it would increase output instead and reduce its selling prices in what became effectively a global pricing war

Prices collapsed as the coronavirus and the COVID19 illness it causes largely halted global travel

Under a deal reached in April OPEC and allied countries were to cut nearly 10 million barrels per day until July then 8 million barrels per day through the end of the year and 6 million a day for 16 months beginning in 2021

However some countries produced beyond their quotas set by the deal One of them was Iraq which remains decimated after the yearslong war against the Islamic State group

On Saturday Iraq Oil Minister spokesman Assem Jihad said in statement that Baghdad had renewed its full commitment to the OPEC deal

Despite the economic and financial circumstances that Iraq is facing the country remains committed to the agreement Jihad said

Analysts had expected OPEC and the other nations to extend the cuts of 10 million barrels per day by one more month but not longer since the level of demand is still fluctuating

If the demand is great countries like Russia will want to produce more oil so they probably wont want to get locked into a longerterm deal that may not help them said Jacques Rousseau managing director at Clearview Energy Partners.

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