Virus: OPEC + agrees on a “historic” drop in oil production

Text by: Pauline Gleize

The brake on the economy caused by the coronavirus pandemic has turned oil prices upside down. Black gold prices have fallen by more than 50% since the start of the year. So, after days of negotiations and several fruitless meetings, OPEC, the Organization of the Petroleum Exporting Countries, and its partners finally reached an agreement on Sunday evening. They will cut production by almost 10 million barrels a day.

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OPEC and its partners will more precisely reduce their production by 9.7 million barrels per day from May, said the Mexican minister on twitter. This clarification is important because it corresponds exactly to the part that Mexico did not want to assume. Mexico City has finally succeeded and will only reduce its production by 100,000 barrels a day. It was his refusal to make an effort to the tune of 400,000 barrels a day that had blocked the agreement last week.

A slightly less ambitious agreement therefore, but which remains of a “ historic ” scope, underlines an analyst. Another expert tempers. According to him, " the worst is avoided for the moment, but the reductions are less than what the market needs ".

That said, the actual decline is expected to be greater, with Saudi Arabia currently exceeding its quotas. Kuwait and the United Arab Emirates should also go beyond their commitments.

OPEC + also relies on non-member producers to make an effort. According to Reuters, several sources within the cartel have estimated that the reduction could overall approach 20 million barrels per day, or 20% of world supply.

The market is turned upside down. Black gold prices have fallen by more than 50% since the start of the year. A fall linked to the collapse in demand, the coronavirus pandemic having put an abrupt brake on the world economy. This forced Riyadh and Moscow to resume dialogue. Saudi Arabia and Russia had launched a price war after their last conference in early March.

Russian President Vladimir Putin and his American counterpart Donald Trump noted on Sunday " the great importance " of the agreement of OPEC and its partners on a historic drop in oil production.

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