DUBAI—Saudi Arabia’s energy minister said on April 13 that effective global oil supply cuts would amount to around 19.5 MMbbl/d, taking into account the reduction pact agreed by OPEC+, pledges by other G-20 nations and oil purchases into reserves.
OPEC and allies led by Russia, a group known as OPEC+, agreed on April 12 to a record cut in output to prop up oil prices amid the coronavirus pandemic in an unprecedented deal with fellow oil nations, including the United States, that could curb global oil supply by 20%.
Measures to slow the spread of the coronavirus have destroyed demand for fuel and driven down oil prices, straining budgets of oil producers and hammering the U.S. shale industry, which is more vulnerable to low prices due to its higher costs.
OPEC+ said it had agreed to reduce output by 9.7 MMbbl/d for May and June, after four days of talks and following pressure from President Donald Trump to arrest the oil price decline.
Prince Abdulaziz bin Salman told reporters via a conference call that G-20 nations outside the OPEC+ alliance had pledged to cut about 3.7 MMbbl/d of oil supply, while oil purchases into reserves (SPRs) were seen at 200 million barrels over the next couple of months, according to the IEA.
Prince Abdulaziz also said the kingdom could cut oil output below its current quota of 8.5 MMbbl/d if there was a need by the market over the coming months and if any reductions were done collectively with other producers on a pro-rata basis.
OPEC+ meets next in June via teleconference to decide on output policy.
“We have to watch what is happening with demand destruction or demand improvement, depending on how things may evolve,” Prince Abdulaziz said.
“This is a situation where every day the numbers change ... you have to maintain being vigilant about how these things may progress,” he said, adding there was still “uncertainty related with the virus and its impact.”
The biggest oil cut ever is more than four times deeper than the previous record cut in 2008. Producers will slowly relax curbs after June, although reductions in production will stay in place until April 2022.
Oil demand has dropped by around a third because of the coronavirus pandemic. Oil prices jumped more than $1 a barrel in April 13 trading after the agreement, but gains were capped amid concern that it would not be enough to head off oversupply with the virus hammering global demand.
But the minister downplayed the drop in oil prices on April 13, saying that the cuts were the reason for the rally in oil prices before the meeting in anticipation of the cuts.
“It’s the typical deal you know: buy the rumor, and sell the news.”
Recommended Reading
Matador Stock Offering to Pay for New Permian A&D—Analyst
2024-03-26 - Matador Resources is offering more than 5 million shares of stock for proceeds of $347 million to pay for newly disclosed transactions in Texas and New Mexico.
Kimmeridge Fast Forwards on SilverBow with Takeover Bid
2024-03-13 - Investment firm Kimmeridge Energy Management, which first asked for additional SilverBow Resources board seats, has followed up with a buyout offer. A deal would make a nearly 1 Bcfe/d Eagle Ford pureplay.
M4E Lithium Closes Funding for Brazilian Lithium Exploration
2024-03-15 - M4E’s financing package includes an equity investment, a royalty purchase and an option for a strategic offtake agreement.
Laredo Oil Subsidiary, Erehwon Enter Into Drilling Agreement with Texakoma
2024-03-14 - The agreement with Lustre Oil and Erehwon Oil & Gas would allow Texakoma to participate in the development of 7,375 net acres of mineral rights in Valley County, Montana.
California Resources Corp. Nominates Christian Kendall to Board of Directors
2024-03-21 - California Resources Corp. has nominated Christian Kendall, former president and CEO of Denbury, to serve on its board.