The Organization of the Petroleum Exporting Countries (OPEC) and its partners agreed on Sunday, April 12, to "the biggest drop in production in history". The objective: to raise oil prices during the Covid-19 pandemic, and despite the tensions between Russia and Saudi Arabia.

The meeting "ended with a consensus of OPEC + producers on production cuts from May," said Saudi Energy Minister Abdul Aziz bin Salman on Twitter.

An agreement confirmed by his Kuwaiti counterpart, Khaled al-Fadhel, which evokes an agreement "historic to reduce the production of member states of OPEC + by almost 10 million barrels per day, from May 1".

Mexican representative Rocio Nahle Garcia also praised on Twitter "the unanimous agreement of the 23 participating countries", speaking of a "reduction of 9.7 million barrels of oil" from May.

He added: “these production adjustments are historic; they are largest in volume and the longest in duration, as they are planned to last for two years. We are witnessing today the triumph of international cooperation and multilateralism which are the core of OPEC values. ” pic.twitter.com/7yMTTWbgGX

- OPEC (@OPECSecretariat) April 12, 2020

Resumption of dialogue between Ryad and Moscow

"Even if the production reductions are less than what the market needed, the worst is yet avoided," said Magnus Nysveen, an analyst at Rystad Energy.

OPEC resumed a videoconference started on Thursday with the OPEC + cartel led by Russia, the world's second largest producer.

For these discussions to take place, Ryad and Moscow had to re-engage in dialogue after a price war started after their last conference on March 6 at OPEC headquarters in Vienna (Austria).

The two countries had been surprised in the meantime by the rapid spread of Covid-19, which has penalized demand in recent weeks, at a time when the supply of crude was already strongly in surplus.

Russian President Vladimir Putin and Saudi King Salman noted on Sunday evening the "great importance" of the oil deal, the Kremlin said.

This "will not restore market balance"

After long negotiations, Friday at dawn, OPEC and its partners had agreed on a reduction in May and June of world production to the tune of 10 million barrels per day, according to OPEC.

However, Mexico, finding the effort demanded - the production reduction of 400,000 barrels a day - excessive - had not given the green light to the agreement.

Rystad energy doubts, however, the ability of producers to sustain prices despite the agreement. "A reduction of 10 million barrels per day in May and June will prevent prices from falling into an abyss, but it will still not restore market balance," say analysts.

Trump hails "very good deal for everyone"

The world's largest producer, the United States is not a member of the Opep + alliance but "supports the agreement", favorable to its shale oil industry, in great difficulty.

Sunday evening, US President Donald Trump also welcomed "a very good agreement for all".

The big Oil Deal with OPEC Plus is done. This will save hundreds of thousands of energy jobs in the United States. I would like to thank and congratulate President Putin of Russia and King Salman of Saudi Arabia. I just spoke to them from the Oval Office. Great deal for all!

- Donald J. Trump (@realDonaldTrump) April 12, 2020

While still hovering around $ 60 a few months ago, prices hit levels seen at the start of last week since 2002.

The price of a barrel according to the OPEC basket, which serves as a reference for the cartel, was just above $ 21 before the announcement of the agreement, while half of humanity remains confined.

With AFP

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