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. If Russia and Saudi Arabia reach an agreement with or without the United States, it will not enter into force immediately. According to Livingston, it would take weeks to fully implement. Stopping production means more than stopping a change. Saudi Arabia will implement its reduction to a production level of about 11 million barrels per day, a delegate said.
This is less than the most recent production levels, which increased by more than 12 million per day at the beginning of April. “I hope the U.S. oil industry has avoided a most pessimistic scenario,” said Amy Myers Jaffe, an energy and Middle East expert at the Council on Foreign Relations. “There will still be bankruptcies, but for now, the fear of a great destruction of the industry can be put aside because the worst of the price war has passed.” 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. The IMF issues a warning. Kristalina Georgieva, the head of the International Monetary Fund (IMF), said more than 170 countries will see their standard of living fall as coronavirus measures devastate the global economy. “Just three months ago, we expected positive growth in per capita income in more than 160 of our member countries by 2020. Today, this figure is turned upside down: we are now in favour of negative growth in per capita income in more than 170 countries this year. Georgieva`s statements came ahead of the IMF`s new forecast for the global economy, expected next week. Georgieva added that more than 90 countries have requested assistance from the IMF since the beginning of the crisis.
EU heads of state and government agree on an economic package. The heads of state and government of the European Union have reached an emergency agreement to counter the most serious economic consequences of the coronavirus pandemic. The Netherlands, which had led the opposition to ask the southern European nations to access simpler lines of credit, finally had to compromise after German Chancellor Angela Merkel called a phone call between Dutch Prime Minister Mark Rutte and Italian Prime Minister Giuseppe Conte. Conte had previously warned that a failure of a deal could lead to the end of the EU. Nevertheless, “without any kind of assurances from the United States, the Saudi-Russian talks are likely to be postponed to the third quarter, once the overall storage capacity is exhausted,” Birch said, adding that the EIU`s oil forecasts are based on global capacity by the end of June. For more than a month, Russia and Saudi Arabia have been in a price war that has destabilized the global oil market. Following the virtual conference call of OPEC members on Thursday, the G20 energy ministers will meet on Friday. Friday`s oil prices posted their biggest record weekly profit, boosted by expectations from Saudi Arabia and Russia to work together to reduce global crude oil production, but analysts said any deal to push back a market surplus would likely need help from the United States, which has yet to mention plans to reduce their record production levels.