OPEC + debates biggest cut in history as virus destroys demand for oil

DUBAI/LONDON/MOSCOW: OPEC and its allies are working on an agreement for an unprecedented cut in production equivalent to around 10% of global supply, an OPEC source said after United States President Donald Trump, calling on the oil nations to stop the oil route caused by the coronavirus. pandemic.

The meeting of OPEC and allies like Russia is scheduled for Monday, April 6, the Azerbaijani energy ministry said, but details on the exact distribution of the production cuts are still scarce.

They have dropped to around $ 20 a barrel from $ 65 earlier this year, as more than 3 billion people were blocked due to the virus, reducing globally to a third or 30 million barrels per day.

Trump said Thursday that he had spoken to both Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman and they agreed to cut supplies by 10-15 million bpd from the total global supply of around 100 million bpd.

Trump said he did not make any concessions to Saudi Arabia and Russia, such as agreeing to a cut in U.S. domestic production, a move prohibited by U.S. antitrust legislation.

Some US officials USA They have suggested that US production. USA It was destined for a sharp decline anyway due to low prices.

The United States needs to contribute shale oil, an OPEC source said. Russia has long expressed frustration that its joint cuts with OPEC only supported higher-cost US shale producers.

A second OPEC source said that any cut above 10 million bpd should include producers from outside OPEC +, an alliance that includes members of OPEC, Russia and other producers, but excludes oil nations such as United States, Canada, Norway and Brazil.

The second source added that Opec + was observing the result of a meeting between Trump and the oil companies later on Friday and that a final figure on the cuts depends on the participation of all oil producers.

Jason Kenney, the prime minister of Alberta, Canada's top oil-producing province, said Thursday that Alberta was open to joining a production reduction deal.

Oil prices rebounded from the lows of $ 20 a barrel this week, with Brent trading near $ 33 a barrel on Friday, still less than half its closing level of $ 66 in late 2019.

Cuts out of necessity

Cuts in oil production are about to occur with or without OPEC and its allies, as global levels of oil storage are close to being complete, which means that many producers would soon have no choice but to begin to close the oil wells.

Some 3 billion people worldwide have been blocked to slow the spread of the coronavirus, which has sickened 1 million people worldwide and killed nearly 50,000.

The immense decline in demand sent oil prices to their lowest levels since 2002, hitting the budgets of the oil-producing nations and striking a blow to the U.S. oil shale oil industry, which cannot compete with low prices.

The downward pressure has been exacerbated by the battle for market share between Russia and Saudi Arabia.

The world's major producers have already cut production as fuel demand has dropped precipitously and storage is rapidly filling up.

Brazilian state oil producer Petrobras has already cut production by 200,000 barrels a day, about 6 percent of its production, in response to what its chief executive called the worst crisis in the oil industry in 100 years.

Chevron Corp and BP Plc, based in the USA. The US recently said they would pump less oil from the shale than the previous target.

The free-fall in prices has spurred regulators in the US state of Texas, the heart of the country's oil production, to consider regulating production for the first time in nearly 50 years, while producers in neighboring Oklahoma asked to state regulators who also consider cuts.

Ryan Sitton, one of the three elected Texas oil and gas regulators, spoke to Russia's Novak about a 10 million bpd cut in global supply.

This is not good for anyone, Sitton told Reuters. We are talking about a destabilization of the world energy market.