OPEC, oil nations agree to nearly 10M barrel cut amid virus
Source: AP
By JON GAMBRELL and ELLEN KNICKMEYER
DUBAI, United Arab Emirates (AP) OPEC, Russia and other oil-producing nations on Sunday finalized an unprecedented production cut of nearly 10 million barrels, or a tenth of global supply, in hopes of boosting crashing prices amid the coronavirus pandemic and a price war, officials said.
This could be the largest reduction in production from OPEC for perhaps a decade, maybe longer, said U.S. Energy Secretary Dan Brouillette, who credited President Donald Trumps personal involvement in getting dueling parties to the table and helping to end a price war between Saudi Arabia and Russia.
Oil prices have collapsed as the coronavirus and the COVID-19 illness it causes have largely halted global travel and slowed down other energy-chugging sectors such as manufacturing. It has devastated the oil industry in the U.S., which now pumps more crude than any other country.
But some producers have been reluctant to ease supply. The cartel and other nations on Sunday agreed to allow Mexico to cut only 100,000 barrels a month, a sticking point for an accord initially reached Friday after a marathon video conference between 23 nations. The nations together agreed to cut 9.7 million barrels a day throughout May and June.
In this photo released by Saudi Energy Ministry, Prince Abdulaziz bin Salman Al-Saud, Minister of Energy of Saudi Arabia, third right, chairs a virtual summit of the Group of 20 energy ministers at his office in Riyadh, Saudi Arabia, Friday, April 10, 2020, to coordinate a response to plummeting oil prices due to an oversupply in the market and a downturn in global demand due to the pandemic. (Saudi Energy Ministry via AP)
Read more: https://apnews.com/e9b73ec833e9a5ad304a69e3b9b86914
yaesu
(8,020 posts)cstanleytech
(26,222 posts)why a Republican president and by extension the Republican Congressmen and Senators thought it would be a good idea that the voters be forced to pay higher gas prices when millions of them just lost their jobs.
orangecrush
(19,384 posts)elias7
(3,990 posts)docgee
(870 posts)IronLionZion
(45,380 posts)It also hurts the US shale oil industry. Trump will do anything Putin wants.
padah513
(2,494 posts)That's where the majority of the Russian economy comes from. That's why Putin was hell-bent on us not electing Madame Secretary Clinton as President. He knew she was going to make a hard charge towards the green after she got in and it would have killed the Russian oil industry. Might have dropped the price of oil to the level it is now and kept it there for good.
ProfessorGAC
(64,827 posts)Over the last 50 days, demand has fallen slightly more than 30 million bbl per day.
Because of the rapidity of things going down, the average excess production is 21+ million Bbl/Day.
So, they've pumped more than one billion barrels, they can't sell.
I'm not sure 10 million barrels will do much to prices, absent craziness on the part of commodity speculators.
They'll still be producing 20 million barrels each day for which there is no demand.
So, even at this lower rate, in just 10 days, there will be a billion & a quarter barrels of future inventory. At normal consumption, that's 13 days!
Storage capacity has to be close to max.
IronLionZion
(45,380 posts)This would be a prime time for countries to buy low to fill their strategic national stockpiles, but available storage is likely full and we all have bigger more urgent problems to deal with.
Then there are market share issues, where Russia and Saudi Arabia don't want the US to have larger market share. They're playing a risky game that I'm not sure has any winners.
As economies open back up, demand will gradually increase again if maybe not as high as before. The big fuel consumers are shipping and airlines. Shipping will come back up before airlines.
ProfessorGAC
(64,827 posts)They are running out of room, because they're overproducing by 30 million bbl/day.
Obama almost completely refilled the reserve just 4 years ago.
And, US producers are at all time efficiencies.
US, Canada, & Mexico are basically making North American demand, especially now. Our reserve is being topped off by internal production.
They're going to cut anyway, because storage is bulging.
This 10 million barrel cut, still means a 20 million barrel daily surplus.
The fact that things will go back to normal later, doesn't make those storage facilities bigger right now. Storage capacity is fixed.
It takes 4 months to build the size tank the crude makers need. In four months, they'd need 200 of them!
IronLionZion
(45,380 posts)Trump has ordered Energy Dept to find more storage, but as you said it takes months to build. So I don't see how they're going to manage. China and other Asian countries might buy some as they've been opening up a bit.
They're running out of options fast
ProfessorGAC
(64,827 posts)That's why I think the current cut is bait for the hyper-reactive speculators.
modrepub
(3,488 posts)Shale oil is billions in debt to stock holders, banks and bond holders. Cut the oil price by 50% and it halves your income but you still owe the same amount (in loan payments, stock dividends and bond payments). These companies no longer have the cash flow to make payments. Not making payments cascades through the financial system, mainly for banks that lent these companies billions and stock and bond holders (institutional investors/401k/pension funds) who expect payments.
The energy markets are constantly in this boom/bust cycle. Prices skyrocket, assets inflate, market capital gets attracted, oversupply takes place due to skewed investment, supply outstrips demand, prices collapse, bankruptcies ensue, supplies fall, demand outstrips supply, prices skyrocket,..... Imagine if we'd direct capital towards more sustainable energy model instead of this constant boom/bust cycle product...
safeinOhio
(32,632 posts)40% drop in demand. That doesnt add up.
gab13by13
(21,234 posts)but it does give them an excuse to raise gas prices. Shale oil needs to be at least 40 dollars a barrel to survive, unless Trump gives them bail out money. Isn't it China that does stuff like that?
safeinOhio
(32,632 posts)Miguelito Loveless
(4,451 posts)Russia will cheat. Second demand has fallen about 20%-25%, so a 10% cut will do nothing. Third, frackers are screwed with pretty much any price below $55-$60/bbl.
gab13by13
(21,234 posts)MosheFeingold
(3,051 posts)Id like to price to rise to discourage use.
A tariff wouldnt offend me.
Bengus81
(6,927 posts)Let a load of other businesses do the same and their faced with price fixing and RICO violations.
Could Kroger,Walmart,Safeway and other huge chains meet in some room and order a slow down in buying toilet paper and fix a base price of $50 for a package of four rolls?
marble falls
(56,996 posts)If they cut production, someone else will fill the gap.