Oil-producing countries signed a major deal on limiting production for a period of two years
Pixabay.com Most countries will reduce production from October 2018, Russia and Saudi Arabia – from a base level of 11 million barrels per day
the Organization of countries – exporters of oil (OPEC) and other oil-producing countries, including Russia, signed an agreement to reduce oil production to 9.7 million barrels per day in may-June 2020. Mexico, which hindered the deal will reduce production at 100 thousand barrels per day, “Vedomosti” reports with reference to the Ministry of petroleum of Iran.
Terms of the new deals were discussed on April 9 at the videoconference, which lasted over 10 hours. Countries agreed to reduce production by 10 million barrels a day – about 23% of their total production. It was planned that the restrictions will gradually be weakened: 8 million barrels per day, or about 18% of the total production from July to December 2020, and 6 million barrels per day or 14% of production from January 1, 2021 through April 30, 2022-th. In DECABray 2021 agreement should be revised.
Most countries will reduce production from October 2018, Russia and Saudi Arabia – from a base level of 11 million barrels per day. Both countries first lower daily production to 8.5 million barrels, and then raise it to 9 million barrels, and then to 9.5 million barrels. Gas condensate in the calculations is not taken into account.
First acceded to the agreement 22 countries, and its fate was dependent on Mexico, which had expected a decline of 400 thousand barrels per day. In the end, the country agreed to cut production by 100 thousand barrels. The remaining 300 thousand, as requested by the representatives of Mexico, compensate US.
10 April G20 meeting, which also discussed the restoration of balance in the oil market. After her Russian energy Minister Alexander Novak said that the terms of the deal, OPEC+ agreed on all 23 participating countries of the agreement. In this country, non-OPEC+, total will reduce daily production by 5 million barrels. In a statement after the meeting “big twenty” no information on concrete steps to reduce production. The organization creates short-term focus group, which will develop measures to stabilize the market.
OPEC Secretary General Mohammad of Sanusi Barkindo noted that the surplus in the oil market may be about 14.7 million barrels per day, and global storage capacity of crude oil will be exhausted before the end of may. A two year option agreement was chosen as the most effective for the market. The readiness to cut production, also said the United States, Norway, Argentina and Canada, as well as the Organization of African oil producers. U.S. energy Secretary Dan Browett said at the meeting of the G20, which, he predicted, by the end of 2020, oil production in the United States for market reasons has fallen by almost 2 million barrels a day.
Vice-President “LUKOIL” Leonid Fedun told RBC that as a result of the new transaction prices are notft will rise to $40 a barrel by the second half of the year, but the final alignment of supply and demand will not happen before the end of 2022. Fedun believes that April will be severe for the oil market and the situation will improve only at the end of may, if all countries would respect the agreement.
He noted that oil companies may be afraid to cut production because of technical features: the stop field may lead to actual loss. But if the transaction took place, after 30-40 days when the price of oil at $15-20 per barrel, oil companies would still have to stop wells, and export tax “would have almost zeroed”. He recalled that in late March some of the party’s Urals oil has been sold at negative cost.
in addition, if the transaction did not take place, Saudi Arabia, developing production and sold oil at a discount, would begin to supplant Russian oil to the European market. USA and Canada also planned to impose duties on oil imports – about 30% of the cost.
According to experts, while reducing production at 10 million barrels a day to balance the oil market it would take 6 to 12 months. Meanwhile, the download of storage will continue to grow, and in the next three months commercial storage filled with 100% free will only store in the state and strategic reserves.
Such a glut in the market will continue to exert significant pressure on prices. In the short term oil may again fall to $25-31 per barrel, but in the second half will rise to $35-38 due to the new cuts and the global economic recovery. By the end of the year oil prices could reach $35-42 per barrel.
the Oil market cautiously responded to the agreement by OPEC regarding production cuts. At the opening of trading on the stock exchange ICE the price of oil grades Brent and WTI grew 1-3%. 01:03 MSK price of Brent oil grew by 2.45% to $32,25 per barrel, WTI – 0.22% dabout $to 22.81 per barrel, writes “Kommersant”.
After prices moved to the fall. At 1:56 MSK price of June futures on Brent fell 0.6 percent to $31,29 per barrel. The price of WTI crude oil fell 0.5% to $28,66 per barrel. At 03:44 MSK Brent crude oil grew by 4.4% to us $accounting period 32.85 per barrel, WTI rose by 6.8% to $24,31 per barrel.