After week-long negotiations and bilateral talks, ministers from the OPEC+ alliance and the Group of 20 nations, came to the historic decision to slash the production of oil by 9.7 million barrels per day. With this decision, the oil price war that began in mid-March may come to an end. Summachar’s Coverage: Russia And Saudi Weaponize Oil Prices
Crux of the Matter
The Energy industry is one of the worst affected industries by Coronavirus. After Russia refused to slash the production of oil to meet the dragging demand, Saudi Arabia initiated an oil price war. The whole Energy sector has experienced a nightmare because of this war as Brent Crude Oil prices nearly halved following the fallout. After week-long negotiations, the world’s top oil producers agreed to put a curb on the production of crude oil amid a slump in the demand across the globe due to Coronavirus. The implementation of the deal will start on 1st May. Iraq’s Oil Minister Thamir Al-Ghadhban said that the global oil output cut will help stabilize the markets by declining inventories and boosting prices. The global consumption of oil is likely to fall by 27 million and 20 million barrels per day in April and May respectively.
It is decided that OPEC+ will put a cut of 9.7 million barrels per day i.e. 0.3 million less than the initial deal proposal of 10 million. The US, Brazil, and Canada will reduce another 3.7 million barrels per day in global production. G20 nations have declared a cut of 1.3 million barrels per day from their side. Mexico was on the verge of spoiling the negotiations to cut global oil production. But due to the urgency of the matter and the threat posed by the coronavirus, it finally agreed to cut its production by 1,00,000 barrels. American shale oil companies are likely to better off with a high price of crude oil.
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
Curiopedia
In order to seal this OPEC deal, American president Donald Trump decided to help Mexico by compensating them for not reducing oil production by 10%.
Ecuador, Indonesia, and Qatar are the elapsed members of the OPEC. OPEC is often referred to as a Cartel that operates to reduce market competition.
Russia has the largest reserves and is the largest exporter of Natural Gas in the world. It also has the second-largest coal reserves and the eighth largest oil reserves. While it is also the 3rd largest energy consumer.
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