Will Saudi And Russia Come To An Agreement
It was not immediately clear whether the Trump administration has made a formal commitment to cut U.S. production, but in the face of falling prices, many companies in the country have already cut production. There is no international mechanism to strictly enforce these production agreements and fraud is common. The agreement will reduce production by 9.7 million barrels per day. While significant, the reduction falls well short of what is needed to boost on-demand oil production. An oil price war between Saudi Arabia and Russia began in early March, when the Organization of Petroleum Exporting Countries, along with its leading oil maker Saudi Arabia and allied oil producers, led by Russia, failed to reach an agreement to cut production. Saudi Arabia and Russia have agreed on the principle of a reduction in oil production, the Wall Street Journal reported on Thursday. The Organization of Petroleum Exporting Countries is holding a virtual meeting with its allies, including Russia, with the goal of balancing the oil market, which has suffered from a drop in demand linked to efforts to stop the spread of COVID-19, and a price war between Moscow and Riyadh, which has submerged the world with crude oil. Under the agreement in principle, Saudi Arabia would withdraw 4 million barrels per day from production in April, while non-OPEC Russia would cut 2 million barrels per day, the Wall Street Journal reported.
Iraq and other major OPEC oil exporting nations have not yet agreed on concrete cuts to oil production. May West Texas intermediate oil clk20 rose $1.02, or 4.1 percent, to $26.11 a barrel. June Brent crude uk:brnm20 rose 70 cents or 2.1% to $33.54. Trump backed President Andrés Manuel Lepez Obrador by vaguely promising that he would balance the difference and helping the Saudis and Russians not abandon the interim agreement. “The agreement represents the expectation of stability,” Ecuadorian energy minister and former OPEC secretary general Rene Ortiz said in an interview on Sunday. “But if the markets react accordingly, it`s another ball game.” “However, the depth of the production cuts discussed remains unclear and there is a high risk that the talks will fail,” she said. Nevertheless, the EIU “temporarily” raised its brent crude oil price forecast to $36 per barrel in 2020 from an earlier outlook of $32. But Russia has other debts.
It has limited processing capacity and its refineries do not have sufficient storage capacity. European demand has collapsed and, while China is still buying oil at attractive prices, its stockpile will be full in a month or another, causing Russian crude oil to fail. Oil prices may fall again in the coming days if traders are not satisfied with the further cuts. In fact, the price fell sharply on Thursday, the last day oil futures were traded, although a deal was short.