Sunday`s agreement was the result of more than a week of telephone conversations with Mr. Trump; Saudi Crown Prince Mohammed bin Salman; and President Vladimir V. Putin of Russia. Trump praised the deal and said on Twitter that it will “save hundreds of thousands of energy jobs in the United States.” OPEC members and their allies began talking last week in the hope that the United States, Canada and other Western producers would accept explicit cuts of up to four million or five million barrels per day. Instead, U.S. officials simply assured that crude oil production would be reduced over time, in addition to the voluntary reductions that have already begun at some U.S. companies. The agreement announced sunday will amount to 7.7 million barrels per day from July to December and 5.8 million barrels per day from January 2021 to April 2022. The group also considered holding an online meeting on 4 June to discuss production policy, after Algeria, which chairs the Organization of Petroleum Exporting Countries, proposed to hold a meeting scheduled for 9-10 June.
The agreement is massive and represents the largest drop in production in OPEC history. The reduction is more than twice as large as the 4.2 million barrels per day that the oil cartel made through a series of budget cuts during the 2008 financial crisis. However, analysts say this is likely to be overshadowed by the magnitude of the loss of demand in the grip of the pandemic. In recent weeks, as low oil prices put pressure on U.S. producers, companies disagreed on whether they wanted government intervention. But they are united in the frustration of the Saudi-Russian price war. Extremely low prices will lead to reductions in U.S. production – which Russia and Saudi Arabia have long wanted – as oil wells become too expensive to operate. After a drop in demand for coronaviruses and a devastating explosion in prices, the alliance of the 23 nations of the Organization of Petroleum Exporting Countries and its allies is cautious in rebalancing a global oil market in the early stages of recovery.
Led by Saudi Arabia and Russia – and remotely provoked by the Trump administration – the group agreed in April to cut production by 9.7 million barrels per day. 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. Instead of easing production cuts in July, OPEC and its allies, a group called OPEC, discussed keeping the cuts beyond June. Saudi Arabia and Russia generally lead the way in setting global production targets. But President Trump, facing a new election campaign before a re-election campaign, a falling economy and U.S. oil companies facing falling prices, took the unusual step of engaging after the two countries engaged in a price war a month ago. Trump had made a deal a central priority. This impasse threatened the entire agreement.
On Friday morning, obrador said the U.S. had agreed to make further cuts to oil production on behalf of Mexico, although it was not known at all how it would work because the U.S. government could not impose production decisions on private companies. According to the sources, there is still no agreement on whether an OPEC production meeting is to take place on Thursday, the main obstacle being relations with countries that have not achieved the deep supply cuts required under the existing pact. But even Friday`s unprecedented agreement shows that it is not easy to stop the bleeding caused by the unprecedented collapse in global oil demand due to the pandemic.