OPEC and Russia have agreed to cut oil production by up to 10 million barrels per day effective May 1, 2020. However, oil prices recorded sharp declines after the announcement as the markets expected production cut by at least 20 million BPD.
Both Russia and Saudi Arabia will cut output by about 22-23% from a level of 11 million BPD to about 8.5 million BPD in May and June. OPEC+ further revealed that production cuts would ease to 8 million BPD between July and December and relaxed further to 6 million BPD between January 2021 and April 2022.
However, the full impact of the output cut on the market will be understood on Friday when G-20 ministers hold a meeting on Friday. Apparently, Saudi Arabia is leading persuasions to get the United States involved in a production cut.
In the last few weeks, oil prices have tumbled to record lows hasted by coronavirus pandemic and flooding of the market with oil from Saudi Arabia and Russia.
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