Oil producing nations in patched up ‘agreement’ – Deal to stabilize market

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FINALLY after three days of negotiations among OPEC, its “Plus” partners and G20, an acceptable conclusion has been achieved, providing certain assurances to OPEC-Plus in moving some volumes from the markets into their strategic reserve.

Kamel Al-Harami Independent Oil Analyst

The agreement simply calls for reduction of ten million barrels per day from next month, with Saudi Arabia and Russia sharing the biggest volume of five million barrels between them while the rest will be shared by the rest of OPECplus. Iraq, Kuwait and the United Arab Emirates will share total cuts of 2.3 million barrels, and the remainder will be for the rest. However, Iran, Libya and Venezuela have been exempted.

On the other hand, Mexico didn’t comply, refusing to reduce by more than 100,000 barrels. This will cause delays in achieving a quick outcome, leaving the matter pending between USA and Mexico to resolve as a last resort. Now that agreement has been reached, what is next will be the market’s reaction, which will be measured and observed in the coming days after businesses open following the Easter holidays. However, the reduction is small compared to the huge volume of reductions in demand that can exceed 25 million barrels per day.

This will impose a great pressure on the oil prices, and will probably push the oil prices further down. OPEC-Plus is going to be facing a hard challenge. It raises certain questions concerning the reason for not acting now in terms of reducing production promptly instead of doing so later or after 15 days with no buyers in hand, while all inland and offshore storages are full.

Cutting oil production by ten million barrels is the biggest deal in oil history with the combined efforts of all major superpowers to bring stability and order for helping the world economy and directing it to a gradual stable growth.

The road is not smooth, and many countries and companies will face bankruptcy including some in the OPEC group. The low prices are not of great help especially when they hover below $40 per barrel. Some shale oil companies will disappear as well and be taken over by major oil companies that can survive to remain a huge match to OPEC-Plus.

Great efforts were exerted to finalize the OPEC-Plus agreement, with USA pushing hard with all kinds of threats towards the oil producing countries especially in imposing oil tariffs on the imported oils. What is even more threatening is preventing imported oils to be used in own country’s refinery in the USA, bringing a new kind of threat to companies that are spending and investing in USA land.

Now that OPEC-Plus has reached an agreement, its results will be declared with the relevant verdicts in the coming weeks. However, have they done enough? P.S. – The number of confirmed coronavirus cases is increasing, exceeding 100 per day in the country. We do not know if we have reached the peak. Considering this, staying at home is an easy option to be safe. Maintaining social distancing by two meters is another way to be safe. This increase in the number of confirmed cases will force Kuwait to take tougher actions instead of a total lockdown. This is an option open to us but we can do without it. Please stay home. We beg for your support. Please help us in coming home. Not much to ask, as we will all be rewarded shortly. Stay home.

By Kamel Al-Harami Independent Oil Analyst
Email: [email protected]

This news has been read 6225 times!

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