OPEC, Russia approve biggest-ever oil cut to support prices amid coronavirus pandemic

Offshore staff

BAKU/DUBAI/LONDON – OPEC and allies led by Russia agreed on Sunday to a record cut in output to prop up oil prices amid the coronavirus pandemic in an unprecedented deal with fellow oil nations, including the United States, that could curb global oil supply by 20%.

According to Reuters, the group, known as OPEC+, said it had agreed to reduce output by 9.7 MMb/d for May and June, after four days of talks and following pressure from US President Donald Trump to arrest the price decline.

OPEC+ sources said they expected total global oil cuts to amount to more than 20 MMb/d, or 20% of global supply, effective May 1. OPEC had the same figure in its draft statement but removed it from the final version, according to the Reuters report.

The biggest oil cut ever is more than four times deeper than the previous record cut in 2008. Producers will slowly relax curbs after June, although reductions in production will stay in place until April 2022.

Total global cuts will include contributions from non-members, steeper voluntary cuts by some OPEC+ members and strategic stocks purchases by the world’s largest consumers.

Saudi Energy Minister Prince Abdulaziz bin Salman told Reuters that real effective cuts by OPEC+ would total 12.5 MMb/d because Saudi Arabia, the United Arab Emirates and Kuwait would cut supplies steeper given higher output in April.

Three OPEC+ sources said non-members Brazil, Canada, Indonesia, Norway and the United States would contribute 4 to 5 MMb/d. Three OPEC+ sources said the International Energy Agency (IEA) would announce purchases into strategic stockpile programs by its members to the tune of 3 MMb/d in the next couple of months.

The IEA said it would provide an update on Wednesday when it releases its monthly report. The United States, India, Japan and South Korea have said they could buy oil to replenish reserves.

04/13/2020