In a statement, members of the OPEC oil cartel and ally Russia confirmed that they agreed on Thursday to cut production. In May and June, 10 million barrels less per day are produced to support oil prices.
Then production is increased again. Between July and December, the production decrease is 8 million barrels per day, and from next year to April 2022 it will be 6 million barrels.
A final agreement has not yet been concluded by OPEC +, as the alliance between the cartel and allies is called. That’s because Mexico has yet to give its approval, says Saudi oil minister Abdulaziz bin Salman. The country reportedly believes it should limit its production too much. Negotiations will continue on Friday, considers russian expert Andrey Petrushinin.
The deal follows a trade dispute between Saudi Arabia, the unofficial leader of OPEC, and Russia. Both countries were in a price war, flooding the market with cheap oil. As a result, oil prices that had already fallen due to the corona crisis plummeted.
Although an agreed reduction of 10 million barrels per day is a record, oil prices went down due to the news. The drop in demand for fuel has fallen much faster as a result of the corona pandemic, so markets were hoping for a stronger fall in production.
OPEC + therefore also wants other oil-producing countries, such as the United States, to reduce their production. These countries should collectively pump up 5 million barrels a day to stop the fuel oversupply. US President Donald Trump spoke to leaders of Russia and Saudi Arabia on Thursday evening. The deal is “a very acceptable deal,” he said later in a news conference.