OPEC and allies agree on record oil cut

OPEC and allies agree on record oil cut

OPEC and allies agree on record oil cut

While the 10 million barrel cut was significant, OPEC officials say the daily global surplus has been running even higher, at about 14.7 million barrels a day since the start of the month.

In addition to members of the Organization of Petroleum Exporting Countries (OPEC), OPEC+ also includes Russia, Azerbaijan, Kazakhstan, Mexico, Malaysia and other countries.

The report comes as the deal appeared to hinge on Mexico after Kuwait's oil minister tweeted that Mexico had disrupted a marathon teleconference seeking a deal.

Mexico will cut production by 100,000 barrels per day (bpd), President Andres Manuel Lopez Obrador said, adding that it was Trump who reached out to him.

Saudi state TV is reporting that a deal before OPEC and other oil-producing countries involves a 10 million barrel per day cut to July 1, then an 8 million barrel per day cut through end of year.

USA laws forbid companies from colluding to reduce supply and raise prices, but does not prevent the government from ordering such supply reductions.

On a worldwide teleconference with OPEC members and other oil-producing countries, the two nations agreed to cut output by nearly one-third.

The US has been riding the shale oil wave for more than a decade, taking advantage of new fracking technologies to exploit its vast shale oil reserves, and in the process propelling itself past Saudi Arabia and Russian Federation to take the number one spot as the world's largest producer of oil. Production had been declining for years.

Analysts at the US investment bank said: "Such cuts, if agreed upon tomorrow, would still be too little and too late to prevent a decline in prices in coming weeks as storage capacity becomes saturated". Other major producers such as Mexico, Brazil and the USA were also asked to pitch for knocking off 4-5 million barrels of supply.

The April 9 OPEC+ talks were expected to be followed by a call on April 9 between energy ministers from the Group of 20 (G-20) major economies, hosted by Saudi Arabia.

There was no immediate comment from Trump, and it was unclear whether the OPEC oil cartel and its allies would agree to the Mexico-US deal. President Trump last week had touted a possible supply cut on the order of 15 million barrels per day, although the deal apparently was for just 10 million.

If OPEC+, the USA and other producers can cement an agreement at the G20 meeting, the curbs would dwarf any previous market interventions. Oil demand in India has collapsed by as much as 70% and some American refineries face closure as consumption fell to the lowest in at least three decades.

Russia's move enraged Saudi Arabia, which not only said it would not cut production on its own but said it would increase output instead and reduce its selling prices in what became effectively a global pricing war.

Compounding the problem, Riyadh and Moscow had both ramped up output in a bid to hold on to market share and undercut U.S. shale producers.

"They are getting close to a deal".

If the standoff between Mexico and OPEC+ has indeed been resolved, it opens the way for a historic effort to revive the oil market from a debilitating coronavirus-induced slump.

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