The Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers have reached on Thursday night a tentative agreement for a global cut in oil production by 10 million barrels per day for May and June. It is estimated to be the deepest cut ever agreed by the world's oil producers.
The decrease in production amounts to only about 10% of the world's normal oil supply, well below estimates of what the demand for oil has collapsed in the wake of the coronavirus crisis. According to international experts, it is unlikely to slow the massive drop in oil prices in recent months.
"Given the current unprecedented supply and demand imbalance, there could be a colossal excess volume of 14.7 million barrels per day in the second quarter of 2020 ", anticipates Mohammad Sanusi Barkindo, OPEC secretary general.
The tiered deal would reduce production by 8 million barrels per day from July to December, followed by a reduction of 6 million barrels per day from January 2021 to April 2022.
Mexico, not a member of OPEC but of the alliance with independent producers known as OPEC +, expressed reservations about the duration of the agreement, and The entry into force of the pact has been conditioned on their participation. Iran, Libya and Venezuela would be exempt from production cuts due to sanctions or loss of production.
The talks will resume this Friday at the G20 energy ministers meeting, in which OPEC + expects, in addition to Mexico's accession, that other major oil exporters, especially the United States, will join in the efforts to shore up the collapsed oil prices.
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