Opec+ agree to cut output by 10mbpd
DUBAI, April 10, 2020
The Opec+ countries, led by Saudi Arabia and Russia have decided to call off their price war and have announced a tentative deal to reduce production by 10 million barrels per day in May and June, the deepest cut ever agreed by the world's oil producers.
A marathon video conference between Opec members and other major energy powers on Thursday was held via webinar, on Thursday (April 9) under the chairmanship of Prince Abdul Aziz Bin Salman, Saudi Arabia’s Minister of Energy, and co-chair Alexander Novak, Minister of Energy of Russia, a Wam news agency reported.
The was participated by Argentina, Colombia, Ecuador, Egypt, Indonesia, Norway, Trinidad and Tobago and the International Energy Forum (IEF) as observers.
The participating countries in their Declaration of Cooperation reaffirmed their continued commitment to achieve and sustain a stable oil market, the mutual interest of producing nations, the efficient, economic, and secure supply to consumers, and a fair return on invested capital.
In view of the current fundamentals and the consensus market perspectives, the participating countries agreed to:
* Reaffirm the Framework of the Declaration of Cooperation, signed on 10th December 2016 and further endorsed in subsequent meetings; as well as the Charter of Cooperation, signed on 2nd July 2019.
* Adjust downwards their overall crude oil production by 10mbpd, starting on 1st May 2020, for an initial period of two months that concludes on 30th June 2020. For the subsequent period of 6 months, from 1st July 2020 to 31st December 2020, the total adjustment agreed will be 8mbpd. It will be followed by a 6mbpd adjustment for a period of 16 months, from 1st January 2021 to 30th April 2022.
* The baseline for the calculation of the adjustments is the oil production of October 2018, except for Saudi Arabia and Russia, both with the same baseline level of 11mbpd.
* The agreement will be valid until 30th April 2022, however, the extension of this agreement will be reviewed during December 2021.
* Call upon all major producers to contribute to the efforts aimed at stabilising market.
* Reaffirm and extend the mandate of the Joint Ministerial Monitoring Committee (JMMC) and its membership, to closely review general market conditions, oil production levels and the level of conformity with the Declaration of Cooperation and this Statement, assisted by the Joint Technical Committee (JTC) and the Opec Secretariat.
* Meet on 10th June 2020 via webinar, to determine further actions, as needed to balance the market.
* The above was agreed by all the Opec and non-Opec oil producing countries participating in the Declaration of Cooperation, with the exception of Mexico, and as a result, the agreement is conditional on the consent of Mexico.
Saudi Arabia's energy minister said on Friday that the supply pact hinges on Mexico joining in the cuts, Reuters reported.
"I hope (Mexico) comes to see the benefit of this agreement not only for Mexico but for the whole world. This whole agreement is hinging on Mexico agreeing to it," Prince Abdulaziz told Reuters by telephone.
Global fuel demand has plunged by around 30 million bpd, or 30 per cent of global supplies, as steps to fight the coronavirus have grounded planes, cut vehicle usage and curbed economic activity.
Asked about other countries such as the United States, Canada and Brazil joining the Opec+ cut pact, Prince Abdulaziz said: "They will do it in their own way, using their own approaches, and it is not our job to dictate to others what they could do based on their national circumstances."
He added that he expects that other producers will join in the global effort to reduce oil supply to stabilise oil markets.
The planned output curbs by Opec+ amount to 10 million bpd, or 10 per cent of global supplies, with another 5 million bpd expected to come from other nations, according to sources, to help deal with the deepest oil crisis in decades.
The agreement will take about 11.3 million bpd of actual crude supply from the market "provided that Mexico agrees", Prince Abdulaziz said.
Saudi Arabia has agreed a lower baseline for its production cut than its April output which is about 12.3 million bpd, making the kingdom's effective share of reduction at about 3.8 million bpd.
