The OPEC+ group is easing the record 9.7-million-bpd production cuts as of August as demand has started to recover, Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, said at an OPEC+ panel meeting on Wednesday.
“As we move to the next phase of the agreement the extra supply resulting from the scheduled easing of production cut will be consumed as demand continue on its recovery path,” the Saudi minister said, as carried by Reuters.
The Joint Ministerial Monitoring Committee (JMMC) of the OPEC+ group is meeting on Wednesday to decide how to proceed with the cuts. OPEC+, led by OPEC’s top producer Saudi Arabia and by Russia, agreed in June to extend the record production cuts of 9.7 million bpd by one month through the end of July.
According to the original agreement from April, OPEC+ was to cut 9.7 million bpd in combined production for two months—May and June—and then ease these to 7.7 million bpd, to stay in effect until the end of the year. Then, from January 2021, the production cuts would be further eased to 5.8 million bpd, to remain in effect until end-April 2022.
There won’t be another extension of the record 9.7-million-bpd cut, according to the OPEC+ panel meeting today. The oil producers part of the pact will ease the cuts to 7.7 million bpd, but the cuts would actually be deeper than that because of the mechanism for laggards to compensate for their loose compliance in May and June, the Saudi energy minister said.
According to OPEC+ estimates seen by Reuters, the collective OPEC+ cut in August and September would be – on paper at least – some 8.54 million bpd in the next two months, as Iraq, Nigeria, Angola, Russia, and Kazakhstan would be cutting deeper to compensate for previous lack of compliance.
Saudi Arabia will keep its August oil exports at the same level as in July, Prince Abdulaziz bin Salman said today, confirming earlier reports that the Kingdom would not be rushing to boost its supply to the market.
By Tsvetana Paraskova for Oilprice.com
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