By
Bena Ilyas
March 11th, 2024
The meeting between OPEC and its allies OPEC+ lasted more than nine hours and the agreement on oil production cut was finally reached.
Oil price war may come to an end as OPEC and its allies OPEC+ agreed to the historic production cut. As a result of talks between OPEC and other major oil producers led by Russia, the output will be cut by 10 million barrels a day.
Because of the coronavirus pandemic, the demand destruction is about 30 million barrels per day, or 30% of global supplies. To discuss the state of the oil market and its coronavirus response, OPEC and the allies decided to hold talks and find a solution.
At 10:30 a.m. ET on Thursday, Saudi Arabia-led OPEC and Russia-led non-OPEC oil-producing nations started their 9th extraordinary ministerial meeting via webinar. Among the observers, there were Argentina, Ecuador, Colombia, Egypt, Indonesia, Trinidad, Norway, Tobago as well as the International Energy Forum (IEF). The meeting lasted over nine hours, but the agreement on oil production cuts was finally reached.
According to OPEC’s statement, the group will cut 10 million barrels per day in May and June. Further, it will cut 8 million barrels per day from July till the end of 2020, and 6 million barrels per day from January 2021 till April 2022. In December 20201, OPEC will review the extension of the current agreement. Besides, OPEC+ members will meet on June 10 this year via webinar to discuss further actions necessary to stabilize the oil market.
Oil Prices Fall Despite the Agreement on Production Cut
The output cut of 10 million barrels per day is much lower than the market expectation of 15-20 million barrels per day. Therefore, oil prices still remain weak. On April 9, international benchmark Brent crude climbed to $33.87 per barrel during the meeting and closed at $32.84 per barrel. By now, it has dropped by 4.14% and is trading at $31.48. American West Texas Intermediate plunged by 9.29% yesterday to settle at $22.76 per barrel.
OPEC Secretary-General Mohammad Barkindo stated:
“COVID-19 is an unseen beast that seems to be impacting everything in its path. For the oil market, it has completely up-ended market supply and demand fundamentals since we last met on 6 March.”
Just before the meeting, the United States cut down its oil production forecasts by over 1 million barrels a day.
The U.S. President Donald Trump said:
“The cuts are automatic if you’re a believer in markets. They’re already cutting. If you look, they’re cutting back. It’s the market. It’s supply and demand. They’re already cutting back and they’re cutting back very seriously.”
He added:
“The numbers are so low that there will be layoffs all over the world. There will be certainly layoffs in this country, and we don’t want that to happen.”
OPEC countries and the oil industry have seen issues in setting prices for decades, and yesterday’s meeting appears to be a start at tackling this problem and ease tensions between OPEC and the United States.
