Agreement To Cut Production
The deal is massive and is the biggest production cut in OPEC`s history. The reduction is more than twice as large as the oil cartel`s reduction of 4.2 million barrels per day following a series of cuts during the 2008 financial crisis. However, analysts say it is likely overshadowed by the size of the loss of demand due to the pandemic. It was not immediately clear whether the Trump administration had made a formal commitment to cut production in the United States, but in the face of falling prices, many companies in the country have already cut production. There is no international mechanism to strictly impose such production agreements and fraud is commonplace. Sunday`s video conference deal is the biggest reduction in oil production ever. Opec, Russia and its allies have agreed to extend record cuts in oil production until the end of July, extending a deal that has helped double crude prices over the past two months by taking nearly 10 percent of global shipments off the market. Negotiations ran into a hicle when Mexico refused to follow a deal reached by Russia and Saudi Arabia, saying it would only reduce 100,000 barrels a day and not 400,000 barrels. Saudi Arabia strongly opposed Mexico`s position and was concerned that if Mexico could oppose it, others would follow. The talks were complicated by differences between Russia and Saudi Arabia, but on April 2, oil prices rose after President Trump signaled that he expected the two countries to end their feud. Major oil nations that are not members of OPEC Plus, such as Canada, Brazil and Norway, along with the United States, have cut production. The Department of Energy said U.S. oil production would decline by at least two million barrels a day by the end of the year.
Other analysts say the final cut could be three million barrels per day out of the 13.3 million barrels per day produced at the beginning of the year. President Trump has expressed interest in buying oil to fill the strategic oil reserve to further reduce deliveries. Saudi Arabia and Russia typically take the lead in setting global production targets. But President Trump, faced with a re-election campaign, a plummeting economy and U.S. oil companies grappling with falling prices, took the unusual step of engaging after the two countries entered a price war a month ago. Mr. Trump had made a deal a key priority. . . .