EGYPT, Apr 11 (NNN-MENA) – On Thursday, OPEC+ agreed to the largest oil production cuts in history, but oil prices crashed towards $20, as markets decided that a 10 million bpd cut was insufficient to balance the demand deficit.
Yesterday, the G20 met to discuss more cuts and more details will likely come out about the OPEC+ deal. Markets were closed yesterday and so all eyes will be on developments over the weekend.
OPEC+ agreed to joint cuts on the order of 10 mb/d, a historic agreement. The deal called for both Saudi Arabia and Russia capping production at 8.5 mb/d for May and June, after which cuts would ease in phases – down to 8 mb/d and then to 6 mb/d of cuts. The deal was not received well by the markets, which sold off WTI and Brent, over fears that the reductions are inadequate. “The supply and demand fundamentals are horrifying,” said OPEC Secretary-General, Mohammed Barkindo.
OPEC+ is also looking for help from other non-OPEC countries in the G20. Mexico temporarily held up the OPEC+ deal, because it doesn’t want to cut. Mexico’s president said, he spoke with President Trump, who promised to contribute to the cuts on Mexico’s behalf. “First they asked us for 400,000, then 350,000,” Mexico’s President Lopez Obrador said. Mexico was only able to cut by 100,000 barrels a day.”
“Combined with the drop in demand, on the back of the COVID-19 pandemic, Brent will drop to about $20 a barrel, which will lead to major losses in oil-exporting countries,” Medhat Youssef, a former vice-president of the Egyptian General Petroleum Corporation (EGPC), said.
Youssef said, the increase in Saudi oil exports led to an oversupply of crude in global markets.
Youssef explained that the COVID-19 led to a slowdown in industrial and commercial activities in the global markets and reduction in consumption rates of oil.
Amin Al-Nasser, CEO of Saudi Aramco, confirmed that, the company received a mandate from the Ministry of Energy, to increase its oil production capacity to 13 million barrels per day from 12 million barrels.
Abdulaziz bin Salman, Saudi Energy Minister, said, he saw no need to hold a meeting of OPEC+ from May to June, in the absence of agreement on the measures that must be taken, to deal with the impact of the COVID-19 on demand and prices.
He noted that every oil producer should maintain its market share, after Russian Energy Minister, Alexander Novak was quoted as saying that, the price cuts offered by Saudi Aramco had caused a market panic.
