OPEC Secretary General
Mohammed Sanusi Barkindo (L), Saudi Arabia’s Energy Minister Prince
Abdulaziz bin Salman (C) and Russian Energy Minister Alexander Novak (R)
attend an Opec-JMMC meeting in the UAE capital Abu Dhabi on September
12, 2019.
KARIM SAHIB | AFP via Getty Images
https://www.cnbc.com/2020/03/05/opec-meets-to-decide-whether-to-cut-output-as-coronavirus-hits-demand.html
- The 14-member group, led by Saudi Arabia, decided on Thursday to cut production by 1.5 million barrels per day (bpd) through the second quarter of the year.
- OPEC added the group would review this policy at its next meeting on June 9.
- The proposed cuts, which were at the top end of analyst expectations, are believed to be conditional on approval from Russia.
OPEC has agreed to impose a deeper round of
production cuts in order to support oil prices, paving the way for
crunch talks with non-OPEC leader Russia, who still has to agree to the
plan.
The 14-member group, led by Saudi Arabia, decided on
Thursday to cut production by 1.5 million barrels per day (bpd) through
the second quarter of the year.
OPEC added the group would review this policy at its next meeting on June 9.
The proposed cuts, which were at the top end of analyst expectations, are believed to be conditional on approval from Russia.
It
means energy market participants will now turn their attention to a
meeting of both OPEC and non-OPEC members, sometimes referred to as
OPEC+, on Friday.
Ahead of the OPEC+ meeting, analysts were
concerned a long-standing energy alliance between Saudi Arabia and
Russia would come under intense scrutiny.
That’s because Russia’s
appetite for deeper production cuts has been far from certain in recent
weeks. Moscow is reportedly in favor of an extension to the current
level of cuts rather than a further reduction.
Oil prices reversed early gains to move lower on Thursday. International benchmark Brent crude shed 32 cents, or 0.6%, to trade at $50.86 per barrel, while U.S. West Texas Intermediate stood at $46.68, around 0.2% lower.
Speaking
shortly after the OPEC meeting on Thursday, Iranian Oil Minister Bijan
Zanganeh said that Tehran would remain exempt from the proposed
reduction.
How did we get here?
OPEC
and non-OPEC producers first committed to curtailing their collective
oil production policy back in 2016 in an effort to bolster prices, with
the deal coming into force in January 2017.
In December 2019, it was extended and the alliance agreed to curb oil output by approximately 1.7 million barrels per day. Saudi Arabia then opted to cut its own production voluntarily by an additional 400,000 b/d for three months, should fellow members stick to their commitments.
In February, OPEC’s joint technical committee (JTC) reportedly recommended a 600,000 bpd reduction in oil production, and an extension of the cuts to end-2020, to alleviate downward pressure on oil prices.
Russia said at the time that it had not yet decided whether to sign up to the additional cuts, however, and that position appears to have continued.
In December 2019, it was extended and the alliance agreed to curb oil output by approximately 1.7 million barrels per day. Saudi Arabia then opted to cut its own production voluntarily by an additional 400,000 b/d for three months, should fellow members stick to their commitments.
In February, OPEC’s joint technical committee (JTC) reportedly recommended a 600,000 bpd reduction in oil production, and an extension of the cuts to end-2020, to alleviate downward pressure on oil prices.
Russia said at the time that it had not yet decided whether to sign up to the additional cuts, however, and that position appears to have continued.
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