The major oil producing countries, in the forefront of which are OPEC countries, began an important video meeting Thursday in search of an agreement on the issue of reducing production in order to support prices that collapsed with the outbreak of the new Corona virus and a price war between Riyadh and Moscow.
Reuters news agency quoted an OPEC source as saying that Saudi Arabia and Russia will cut 23% from a basic level of 11 million barrels per day, and said, quoting the source, that Saudi Energy Minister Abdulaziz bin Salman told OPEC Plus that the kingdom is ready to continue to reduce oil production beyond 2022.
The source also said that the OPEC Plus coalition will cut 10 million barrels per day, and other countries will reduce 5 million barrels per day.
Reuters also quoted three sources in OPEC Plus that the group agreed in principle to cut 10 million barrels per day in May and June.
"The ninth (extraordinary) meeting between OPEC ministers and their counterparts in non-OPEC countries began," OPEC tweeted, and the tweet was accompanied by a photo of Russian Energy Ministers Alexander Novak and Saudi Arabia Abdulaziz bin Salman during a video conference.
"The emergency hope for the market is to avoid a total price collapse and a halt to production" in some locations, said the official at the "Energy Consulting" Burntunn Tungengen.
Saudi Arabia organized the meeting, with the support of US President Donald Trump, on the pretext of reaching a "just agreement that restores the desired balance of oil markets."
The Organization of Petroleum Exporting Countries and its OPEC Plus partners will discuss a significant reduction in world oil production, which is their main weapon in the face of declining global demand for black gold.
It seems that there is a consensus to cut at least ten million barrels per day of joint production, which will represent 10% of global production, a figure that Trump put forward in a tweet last Thursday, but the rates of sharing this reduction between countries will be a thorny issue.
Before the start of the meeting, Kuwaiti Oil Minister Khaled Al-Fadil expected in a press interview that "the oil producing countries will reach an agreement to reduce production by a large amount ranging between 10 and 15 million barrels per day out of a production of about 100 million barrels."
Russia, the world's second largest oil producer and an influential member of the OPEC Plus group, appears ready to cut production after a price war raging with Saudi Arabia to seize the largest possible market share, following the collapse of similar talks to cut production last March.
The Energy Ministry said, as quoted by the agency "TAS" that Moscow is ready to reduce production by 1.6 million barrels.
Are the conditions available?
According to analyst at "Sep" Bjarne Childrop, Saudi Arabia and Russia were "very clear" by asserting that they would reduce their production "only if other major oil producers joined them."
The United States, the world's No. 1 oil producer, is pushing toward an agreement that relieves pressure on its sector, as the cost of shale oil extracted in this country is high and its production is no longer profitable with the current price level.
After American companies were extracting record quantities of oil until now, their production began to decline with the collapse of prices. Last week, it reached 12.4 million barrels per day, compared to 13 million barrels a few weeks ago. It is expected that it will not exceed 11.8 million barrels per day on an annual basis, according to the latest estimates issued by the US Agency for Energy Information.
The crude storage capacities, which are almost completely produced, compel producing countries to limit their production.
Unlike other countries, Washington cannot dictate decisions on American oil producers under the laws on competition that prevent companies from coordinating with one another.
The meeting remains subject to the differences that often arise between Moscow and Riyadh, the last of which last weekend led to the postponement of the meeting, which was originally scheduled for last Monday.
An unprecedented meeting
The meeting decided on a record time is exceptional on more than one level. The invitation to him far exceeded the usual circle and included no less than ten countries outside the framework of "OPEC Plus", including the United States, according to the Russian "TASS" news agency. Norway confirmed its participation as an observer on Thursday.
The meeting is also taking place at a time when the global oil industry is facing "an unprecedented shock in its history," as the International Energy Agency said Monday.
An unprecedented situation prevails in the world as a result of the severe measures imposed on the movement of people and goods in an effort to contain the emerging corona virus, which will lead to an oil surplus in the market that may reach 25 million barrels per day in April, according to "Raishtad Energy".
On Thursday, oil markets rebounded with the start of the meeting and recorded an increase of more than 10%.
In the face of the massive decline in demand, the prices of European benchmark oil Brent and US West Texas Intermediate reached last week to unprecedented levels since 2002, marking the worst season in its history, but returned and achieved Thursday's gains in a positive indicator.
Finally, the conference is being held via videoconference in light of the acute health crisis, and not at OPEC headquarters in Vienna as usual. On Friday, it will be followed by a second meeting on the same topic, which was also called by Saudi Arabia. This time, energy ministers from the G20 countries will participate.