Representatives of oil-producing countries have reached a tentative agreement on limiting production, nudging upward the price of crude that plummeted after a Saudi push to flood the market that coincided with Covid-19 lockdowns.
OPEC+ announced the decision to scale back output by 10 million barrels per day starting on the first day of May, after an hours-long teleconference on Thursday, Reuters reported, citing an OPEC statement. The cuts will slowly reduce over time, easing to 8 million bpd after two months until the end of 2020, and relaxing further in the months afterward.
Thursday’s meeting was called after enormous US pressure on Saudi Arabia to halt the price war with Russia that Riyadh initiated in early March – just before global demand crashed due to half the world going into lockdown over the coronavirus pandemic. Saudi Arabia ramped up oil production drastically, driving the price of crude to as low as $20 a barrel this week.
While this has hurt both Saudi Arabia and Russia – both of which rely on oil revenues to fill their budgets, albeit to a different extent – it has been absolutely devastating for the US shale industry, which relied on a favorable arbitrage between Brent crude and WTI prices to become a major exporter in recent years.
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