OPEC debates biggest-ever oil cut as Coronavirus destroys demand

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OPEC and its allies are working on a deal for an unprecedented oil production cut equivalent to around 10% of global supply, an OPEC source said after the U.S. president called on producers to stop the market rout caused by the coronavirus pandemic.

The meeting of OPEC and allies such as Russia has been scheduled for Monday, April 6, the Azeri energy ministry said, but details were still thin on the exact distribution of production cuts.

Oil prices have fallen to around $20 per barrel from $65 at the start of the year as more than 3 billion people went into a lockdown because of the virus, reducing global oil demand by as much as a third or 30 million barrels per day.

U.S. President Donald Trump said on Thursday he had spoken with both Russian leader Vladimir Putin and Saudi Crown Prince Mohammed bin Salman and they agreed to reduce supplies by 10-15 million bpd out of a total global supply of around 100 million bpd.

But the International Energy Agency warned on Friday that a cut of 10 million bpd would not be enough to counter the huge fall in oil demand. Such an output cut would still result in a 15 million bpd stock-build in the second quarter, said Fatih Birol, the head of the agency.

Trump said he did not make any concessions to Saudi Arabia and Russia, such as agreeing to a U.S. domestic production cut – a move forbidden by U.S. antitrust legislation.

 

U.S.-based Chevron Corp (CVX.N) and BP Plc (BP.L) recently said they would pump less oil from shale than previously targeted.

The freefall in prices has spurred regulators in the U.S. state of Texas, the heart of the country’s oil production, to consider regulating output for the first time in nearly 50 years, while producers in neighboring Oklahoma asked state regulators also to consider cuts.

Ryan Sitton, one of three elected oil-and-gas regulators in Texas, spoke with Russia’s Novak about a cut of 10 million bpd in global supply.

“This isn’t good for anybody,” Sitton told Reuters. “We’re talking about a destabilization of the global energy market.”

— Reuters

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