US President Donald Trump said he had a “big talk” with Russian President Vladimir Putin and Saudi King Salman regarding oil production, expressing the hope that an agreement to control that production would be reached soon ad.
“We have had a big debate on oil production and OPEC and making our industry work well and the oil industry doing better than it currently does,” said Trump, quoted by Reuters.
It remains unclear whether the Trump-mentioned deal would involve U.S. involvement: Reuters reported the President’s statement after OPEC + sources announced that it had reached a tentative deal to withdraw 10 million bpd of global supply starting in May.
It remains to be seen how much everyone will cut. Initial reports from unofficial OPEC sources suggest that Russia and Saudi Arabia will both cut production to around 8.5 million bpd.
Following these unofficial reports that leaked in, OPEC issued a press release, in which it said that all producers would cut from a benchmark of their average for October 2018, except Russia and Saudi Arabia, “both with the same baseline of 11.0 mb / d.”
The cuts, according to the press release, would be effective from May and decrease after June, but would remain effective at a certain level until April 2022, to be revised in December next year. This is quite a long delay for an agreement of this size, which indicates that OPEC + is finally taking seriously the threat that the pandemic threatens global economic activity and the demand for oil. However, it may, as some have warned, be too little too late.
A drop of 10 million bpd, even if it is effective for two months, as planned, would do little to alleviate the glut which is estimated to have reached 30 million bpd. The group said it expects other producers to join cuts of an additional 15 million bpd, which would be better for excess supply and storage capacity.
By Irina Slav for Oilprice.com
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