In a move to save the oil industry — facing the biggest crisis in its history — OPEC and Russia have agreed on new production cuts, with the OPEC+ group agreeing to eliminate 10 million barrels of crude per day for an initial two-month period to save a glutted oil market. Mexico is the only country in the extended OPEC+ group to have refused to take part in the cuts at the same level as others — its energy minister Rocio Nahle proposed a reduction in national output of 100,000 barrels per day instead of the 400,000 barrels per day requested.
Though the new OPEC+ deal is not dependent on additional cuts from outside the group to move forward — such as the United States, Brazil and Canada — OPEC+ is hoping for additional cuts from these and other G20 countries.
The OPEC+ production cuts will begin in May but can only proceed if Mexico participates. From July to December, overall production cuts will lower to 8 million barrels per day, followed by 6 million barrels per day from January 2021 to April 2022.
The fate of a new “OPEC++” deal, in which additional countries could sign up to production cuts, will be the focus of a virtual meeting of G20 energy ministers on Friday, with the US Energy Secretary Dan Brouillette among the global energy leaders expected to participate in the webinar. Alberta Energy Minister Sonya Savage was on Thursday’s OPEC+ call, a first for Canada.
The OPEC+ production cuts would just run through June 10, when OPEC+ is set to meet again. Iran, Libya and Venezuela will be exempted. Saudi Arabia and Russia would bear the brunt of the cuts.
Brent crude was down 4 per cent at market close, losing pace from a nearly 11 per cent rally before the details of the deal were announced. Brent closed at $31.48 per barrel.
