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Petrobras Slashes Oil Output Ahead Of Global Production Meeting

Petrobras has set its April oil production at 2.07 million barrels per day (bpd), after having reduced production by 200,000 bpd in the past two weeks in response to the low oil prices, Brazil’s state-owned oil firm said in a securities filing on Tuesday.  

“The company continues monitoring the market and, if necessary, will make new adjustments always ensuring safety conditions for people, operations and processes,” said Petrobras, the largest producer in the South American country, which not part of the OPEC+ group.

At the end of March, Petrobras—like many major oil firms—announced reductions in capital spending and production guidance due to the oil price crash and the collapse in global oil demand in the coronavirus pandemic.

Petrobras slashed its planned investments for 2020 to US$8.5 billion from US$12 billion and mothballed operating platforms in the shallow-water fields with higher lifting costs per barrel that had turned cash-flow negative after the price collapse. On March 26, Petrobras said it would cut its oil production by 100,000 bpd by the end of March. A week later, Petrobras said it would cut its oil production by 200,000 bpd as of April 1—a volume that includes the production reduction announced the previous week.  

Premium: Ending The Oil War Isn’t Enough

Production levels at Petrobras, being a state-controlled entity, could play an important role in global oil supply management in the coming months, if Brazil and other nations outside the current OPEC+ group, most notably the United States, Canada, and Norway, were to join OPEC+ and its leaders Saudi Arabia and Russia in a global production-cut deal to possibly remove 10 million bpd from the market.

Brazil was expected to be the third-largest growth driver of non-OPEC supply in 2020 after the U.S. and Norway, according to OPEC.

Last week, Petrobras’s chief executive Roberto Castello Blanco said that the oil price war between Saudi Arabia and Russia and any reported talks they may or may not be holding had become irrelevant in the context of the demand loss in the Covid-19 pandemic.   

Analysts are still skeptical that such a large and diverse group of oil producers will agree and implement a collective cut, especially as every country signals they would not reduce their production if the United States doesn’t commit to cuts, too.

By Tsvetana Paraskova for Oilprice.com

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