The economic destruction wrought by the coronavirus global pandemic has contributed to forging of a deal to cut oil production. After months of a stand off between Opec+ partners Russia and Saudi Arabia, Donald Trump recently waded into the debate. Threatening tariffs on imported oil, which was largely seen as a bluff by experts, some stability was returned to the market. However, with the decline of demand for oil, oil storage reaching capacity levels and the price of Brent crude barely recovering from extreme lows, experts have made ominous warnings. Following ramped up production by Saudi Arabia and Russia, the decline in demand, experts are warning that the G20-agreed oil cut will do little to help a flagging market.
Mexican Standoff as Russia and Saudi Arabia Come to Terms
At the historic deal to reduce oil production by 10 million barrels per day, unlikely partner Mexico threatened to play anti-hero and scupper proceedings. In a desperate attempt to bring oil prices back up after the dramatic fall, Russia and Saudi Arabia pledged to cut production by 2.5 million barrels per day each. Scheduled to commence in May, for a duration of two months, the deal promises cuts of 6 million barrels per day into 2022. However, over the course of two days, Mexico’s President Andres Mauel Lopez Obrador, sought concessions. Viewing itself as being forced to make a larger proportionate cut that other partners, Mexico protested the deal’s key condition of it cutting by 400,000 barrels a day.
Experts have warned that despite the deal and early signs of oil price resurgence, the future looks bleak. As the world struggles to get to grips with the coronavirus pandemic, the economy is freefalling into depression. With passenger planes grounded, demand for jet-fuel has all but stagnated. Many of the world’s largest oil consumers remain in lockdown, despite China slowly starting back up.