KUALA LUMPUR: Opec+ is likely to proceed with the 10 million barrels per day (mbpd) supply cuts beginning May 1, which will be gradually reduced across 12 months, said an economist.
OCBC Bank economist Howie Lee said the group member countries have agreed to an output reduction of 10 mbpd in May and June before tapering to 8.0 mbpd from July-December and 6.0 mbpd from January-April next year.
“Going into the meeting, a reduction of 10-15 mpd was touted as the expectations, so the cut of 10 mbpd would reside on the lower end of the estimate,” he said in a report on the latest oil development yesterday.
Opec+ is made up of Opec (Organisation of the Petroleum Exporting Countries) member countries, Russia, and other oil-producing countries.
Lee said Russia and Saudi Arabia might have put aside their differences, but the US participation remains unclear, while Mexico appears unwilling to take part in more output cuts.
“Before the meeting, Kremlin had said it was ready to reduce its oil supply by as much as 1.6 mbpd — a turnaround from its previous reluctance,” he said.
Both countries have expected a drop in prices following their March fallout, causing a drastic oil price plunge.
In another development, a virtual meeting among G20 energy ministers last night was expected to see other oil producing nations outside of the Opec+ bloc reducing output by a combined 5.0 mbpd, said Lee.
He expected countries like Brazil, China and Mexico to agree to some form of short-term supply curbs, given the urgency of the Covid-19 situation.
The meeting would also be the last chance for the US to participate in this exercise and failure to do so could drag down prices again.
According to Lee, the US has kept urging Russia and Saudi Arabia to cut production, but the US managed to wiggle its way out of reducing any production.
“In other words, it is enjoying higher prices with no drop in supply,” he said, adding that Russia has kept insisting that the US needs to do more than claim their shale output would naturally reduce on lower prices. – Bernama
