OPEC members agree to reduce oil production in a 23% by COVID-19

OPEC members agreed yesterday on several cuts in crude oil production in sight of the reduction of demand and subsequent sink in prices caused by the coronavirus pandemic.

The 9th (Extraordinary) OPEC and non-OPEC Ministerial Meeting was held via webinar, on Thursday, 09 April 2020, under the Chairmanship of Prince Abdul Aziz Bin Salman, Saudi Arabia’s Minister of Energy, and co-Chair Alexander Novak, Minister of Energy of the Russian Federation.

The Meeting welcomed Argentina, Colombia, Ecuador, Egypt, Indonesia, Norway, Trinidad and Tobago and the International Energy Forum (IEF) as observers.

They are currently members of OPEC: Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, United Arab Emirates and Venezuela.

Mexico didn’t agree on the cuts adopted by OPEC + members.

Reductions in production

The participating countries agreed on several cuts in production:

Prince Abdul Aziz bin Salman (Minister of Energy of the Kingdom of Saudi Arabia). © Ministry of Kingdom of Saudi Arabia.

1.- Adjust downwards their overall crude oil production by 10.0 mb/d, starting on 1 May 2020, for an initial period of two months that concludes on 30 June 2020.

2.- For the subsequent period of 6 months, from 1 July 2020 to 31 December 2020, the total adjustment agreed will be 8.0 mb/d. It will be followed by a 6.0 mb/d adjustment for a period of 16 months, from 1 January 2021 to 30 April 2022.

The baseline for the calculation of the adjustments is the oil production of October 2018, except for the Kingdom of Saudi Arabia and The Russian Federation, both with the same baseline level of 11.0 mb/d.

The agreement will be valid until 30 April 2022, however, the extension of this agreement will be reviewed during December 2021.

Participants will meet on 10 June 2020 via webinar, to determine further actions, as needed to balance the market.

Other agreements and statements

The participating countries also signed some other agreements:

1.- Reaffirm the Framework of the Declaration of Cooperation, signed on 10 December 2016 and further endorsed in

Alexander Novak, Minister of Energy of the Russian Federation. Image attribution, duma.gov.ru

subsequent meetings; as well as the Charter of Cooperation, signed on 2 July 2019.

2.- Call upon all major producers to contribute to the efforts aimed at stabilizing market.

3.- Reaffirm and extend the mandate of the Joint Ministerial Monitoring Committee (JMMC) and its membership, to closely review general market conditions, oil production levels and the level of conformity with the Declaration of Cooperation and this Statement, assisted by the Joint Technical Committee (JTC) and the OPEC Secretariat.

4.- Reaffirm that the Declaration of Cooperation conformity is to be monitored considering crude oil production, based on the information from secondary sources, according to the methodology applied for OPEC Member Countries.

In the meeting, the OPEC and non-OPEC oil producing countries participating in the Declaration of Cooperation, reaffirmed their continued commitment in the Declaration of Cooperation to achieve and sustain a stable oil market, the mutual interest of producing nations, the efficient, economic, and secure supply to consumers, and a fair return on invested capital.

Image over the headline.- Saudi Aramco Rigs in the Hasbah Field.© Saudi Aramco.

Related Eastwind links:

COVID-19 spread, sinking prices and growth in energy markets, IEA forecast

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