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The organization of Petroleum Exporting Countries (OPEC) and its allies plan to extend record production cuts to the end of July, as the world’s major oil exporting countries take cautious action to rebalance the oil market at a time when the anti epidemic measures have been relaxed.
According to the previous production reduction agreement reached by OPEC + in April, 23 member countries started the first round of production reduction from May 1, with a scale of 9.7 million barrels / day for two months. In the second stage, from July 2020 to the end of the year, the scale of production reduction will be reduced to 7.7 million barrels per day. In the third stage, from January 2021 to April 2022, the scale of production reduction will be 5.8 million barrels per day.
Under the leadership of Saudi Arabia and Russia, 23 OPEC + allies agreed to cut production by 9.7 million barrels per day in April, the report said. Under the agreement, production cuts will be relaxed from the end of June. The deal follows a devastating fall in oil prices and a sharp drop in global oil demand caused by the outbreak. The OPEC + alliance is now expected to extend production cuts for a month at a teleconference scheduled for Saturday.
According to the global times, citing a 7-day report, this large-scale production reduction measure is the largest production reduction agreement reached since the establishment of the OPEC + mechanism. Experts said the decision was a victory for Saudi Arabia and Russia.
Before reaching the new agreement, Iraq promised to strengthen the implementation of the production reduction agreement. In May, Iraq implemented only half of the agreed production reduction of 1 million barrels per day. Nigeria also failed to comply with the production reduction agreement, cutting only 52% of its promised production reduction. The two countries said the representatives had promised to fully abide by the new agreement.
According to kpler, a commodity data company, OPEC and its allies have a compliance rate of 89%, which means that the actual production reduction of the alliance is about 1.1 million barrels lower than the target set in the April agreement. Kpler said Angola and Kazakhstan, like Iraq and Nigeria, need to increase compliance.
At Wednesday’s OPEC technical meeting, delegates were told to be cautious about the recovery of the oil market and recently many countries began to ease travel restrictions after the outbreak, according to people briefed on the meeting.
Participants were also informed that the shale oil production of the US, OPEC’s main competitor, will recover in the summer, as the rebound in oil prices has prompted some closed wells to resume operation, which will reduce the demand for OPEC oil. However, due to the depletion of some reservoirs due to weak investment, the US shale oil production will decline later this year.