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U.S. President Donald Trump said he had a “big talk” with Russian President Vladimir Putin and Saudi King Salman regarding oil production, expressing hopes that a deal on the control of said production would be announced soon.
“We had a big talk as to oil production and OPEC and making it so that our industry does well and the oil industry does better than its doing right now,” Trump said as quoted by Reuters.
It remains unclear whether the deal Trump mentioned would involve the participation of the United States: Reuters reported on the U.S. president’s statement after OPEC+ sources announced that it had reached an agreement in principle to remove 10 million bpd from global supply beginning in May.
It remains to be seen how much everyone will cut. Initial reports from unofficial OPEC sources suggest that Russia and Saudi Arabia will both slash their production to around 8.5 million bpd.
Following those unofficial reports that were trickling in, OPEC issued a press release, in which it said that all producers would be cutting from a baseline of their average for October 2018 except Russia and Saudi Arabia, “both with the same baseline level of 11.0 mb/d.”
The cuts, according to the press release, would be effective from May, and taper down after June, but staying effective at some level through April 2022, to be reviewed in December next year. This is quite a long time for an agreement of this size, which indicates OPEC+ is finally taking the threat that the pandemic is to world oil economic activity and oil demand seriously. However, it may, as some warned, be too little too late.
A cut of 10 million bpd, even if it is effective for two months, as planned, would not do much to relieve the glut, which according to estimates may have reached 30 million bpd. The group said it expected other producers to join in with cuts of another 15 million bpd, which would be better for excess supply and storage capacity.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.