Opec Agreement Cuts

Dec 14, 2020 by     No Comments    Posted under: Uncategorized

Rystad Energy, an independent energy consultancy, estimates that the world before these cuts in April was on for an astonishing oversupply of 28 million barrels per day. Even with a dramatic reduction in opec production and its allies, global oil producers are still preparing for an oversupplied market, low prices and losses. The price fight has also allowed major listed oil companies, such as Exxon Mobil Corp. and Royal Dutch Shell PLC, to be at a low level, causing heavy losses and job losses. Shell and BP PLC have cut their dividends for the first time in years to obtain cash. Chevron Corp. said Thursday that it is joining Denern in cutting spending. Saudi Arabia and Russia agreed on Sunday with other oil-producing nations to cut production by 9.7 million barrels per day for the next two months to stem a drop in oil prices caused by the coronavirus pandemic and the feud between Moscow and Riyadh. President Trump said Friday that the United States could cut oil production to “catch up with the slump” caused by Mexico`s lack of willingness to make deep cuts. It is not clear how such reductions would be made, as the White House does not dictate the production levels of private oil companies; It would be a remarkable turning point in U.S. policy if the country began to make voluntary cuts in oil production. In April, OPEC first agreed to cut supply by 9.7 million barrels per day (bpd) between May and June to support prices that collapsed due to the coronavirus crisis.

These reductions are expected to rejuvenate from July to December to 7.7 million bpd. The group, known as OPEC, also called for countries such as Nigeria and Iraq, which exceeded production quotas in May and June, to be offset by further reductions from July to September. “I welcome OPEC-plus for achieving an important agreement that comes at a crucial time today, as oil demand continues to recover and the world economy is reopened,” U.S. Energy Secretary Dan Brouillette wrote on Twitter after the extension. The OPEC Joint Supervisory Committee, known as the JMMC, will meet every month until December to check the market, follow the rules and recommend reductions. The next JMMC meeting is scheduled for June 18. Oil-producing countries will meet on Saturday to approve the extension of record cuts in oil production and push countries like Iraq and Nigeria to better comply with existing restrictions. In recent weeks, as low oil prices put pressure on U.S. producers, companies disagreed on whether they wanted government intervention.

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