- Oil Producers Announces 13.4mbpd Production Cut
The Organisation of the Petroleum Exporting Countries (OPEC) and other top oil producers on Sunday reached a historic agreement to end global oil glut as COVID-19 pandemic continues to disrupt the global economy and plunge demand for crude oil.
OPEC and non-OPEC members, known as OPEC+, had tried to reduce oil production by 10 million barrels per day for the month of May and June on Thursday but the deal failed after Mexico refused deeper cut amid domestic challenges.
Investors King had reported that OPEC+ members were planning to meet online on Sunday evening to try and reach an agreement. The cartel later announced it would now cut oil production by 9.7 million barrels per day, 300,000 barrels below Thursday’s proposal of 10 million barrels per day.
It should be recalled that OPEC Secretary-general, Mohammad Barkindo, put global oil surplus in the second quarter at 14.7 million barrels per day while other OPEC+ members said they were expecting at least 5 million barrels per day cut from the Group 20 nations.
The U.S, Brazil and Canada later announced they will be cutting oil production by 3.7 million barrels per day to support OPEC+ efforts at reducing global oil glut during this period. Bringing the total number of production cuts to 13.4mbpd.
However, the Group 20 energy ministers are yet to announce their contribution but OPEC+ remains optimistic. Traders have said global oil glut is about 35 million barrels per day considering the numbers of refineries and businesses in the sector that shut down operations because of the coronavirus pandemic. Therefore, they disagreed with Barkindo’s number.
This explained why the 10 million barrels per day production cut announced by OPEC+ on Thursday failed to lift oil prices as they claimed OPEC+ and other top oil producers will have to cut more to reduce global oil glut and prop up oil prices.
Mexico will now cut production by just 100,000 per day.
