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Oil producers in OPEC+ group outline plan to cut output, expect US to join

OPEC-building (Priwo/WikiCommons)

This article was originally published by Radio Free Europe/Radio Liberty and is reprinted with permission.

Representatives of OPEC, Russia, and other oil-producing countries have outlined a plan to cut production, a move meant to stabilize the global oil market shaken by the coronavirus pandemic.

The group, known as OPEC+, said on April 9 after a nine-hour negotiating session that the plan calls for a cut in output by more than a fifth — about 10 million barrels a day — in May and June.

They also said they expected the United States and other producers to join in their effort to prop up prices, which have gone into a tailspin because of the pandemic and supply glut.

But the group said a final agreement was dependent on Mexico, which balked at the production cuts it was asked to make.

More talks are due to take place on April 10 among the energy ministers from the Group of 20 (G20) major economies.

Some oil industry officials have said even an agreement to cut production by 10 million barrels per day won’t be enough to stabilize the market because current oversupply is weeks away from filling up the world’s storage facilities.

OPEC+ is expecting an additional cut of 5 million barrels per day to come from other oil producers including the United States, which is the world’s largest oil producer.

“We are expecting other producers outside the OPEC+ club to join the measures, which might happen tomorrow during G20,” Kirill Dmitriev, the head of Russia’s wealth fund and one of Moscow’s top oil negotiators, told Reuters.

The United States, however, has been reluctant to agree to participate in a cut to prop up prices. Many producers believe a mandated cut would violate U.S. antitrust laws, and Washington has said U.S. output was already falling due to low prices.

The price of a barrel of Brent crude, the international benchmark, has dropped to just over $31 from about $66 in January as a result of a drastic decline in economic activity amid the coronavirus pandemic and the breakdown of a previous OPEC+ deal between Russia and Saudi Arabia.

The end of that deal in March saw Russia and Saudi Arabia announce major supply increases in a fight over market share at a time of plummeting demand. The Russian move was in part driven by a desire to hit indebted U.S. shale-oil producers whose production costs average around $50 per barrel.

The OPEC+ meeting was a video conference in keeping with guidelines to avoid large gatherings amid the pandemic.