The OPEC meeting led to an agreement among countries that they will cut oil production as the coronavirus pandemic drains demand for crude.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, had a nine-hour meeting. Almost all oil-producing nations agreed to cut oil production due to low demand caused by the COVID-19 outbreak. However, Mexico refused to join and commit to its share of the cuts.
The meeting started at around 10:30 AM ET and continued through the evening.
In a Tweet, Mexico’s Secretary of Energy Rocío Nahle said that the country would only reduce production by 100,000 barrels per day for the next two months. Reuters reported that OPEC+ called for a cut of 400,000 barrels per day.
The initial 10 million barrels per day cut would be the standard in May and June, before settling at eight million barrels per day for the rest of the year, according to OPEC.
By January 2021, the cuts would taper to six million barrels per day, which would stretch into April 2022, OPEC notes.
“Although 10 million bpd will help the market on the short term to not fill up storage, it is a disappointing development for many, who still realize the size of the oil oversupply,” said Rystad Energy’s head of oil markets Bjornar Tonhaugen.
“Covid-19 is an unseen beast that seems to be impacting everything in its path,” OPEC Secretary General Mohammad Barkindo said at the meeting. “For the oil market, it has completely up-ended market supply and demand fundamentals since we last met on 6 March,” he added.
Earlier WTI increased more than 12% on reports that Saudi Arabia and Russia were discussing cuts that could have taken 20 million barrels per day of global production offline.
“The market has been underwhelmed by the proposed 10m/bd production cut, perhaps because of early expectations of a massive 20m/bd reduction,” said Helima Croft, RBC’s global head of commodities research.
“However we contend that it is crucial to turn off the tap off the tap in the midst of colossal demand crash and bring the price war to a swift conclusion,” she said.
Meanwhile, U.S. President Donald Trump said he had a discussion with Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman regarding the issue.
“We’re optimistic that they’ll reach an agreement between the Saudis and Russians in an effort to stabilize the markets,” U.S. Energy Secretary Dan Brouillette said Thursday on CNBC’s “Squawk Box” before the OPEC meeting.
“I think they can easily get to 10 million, perhaps even higher, and certainly higher if you include the other nations who produce oil, nations like Canada and Brazil and others. Easily, easily done,” he added.