The Organization of Petroleum Exporting Countries has reached an agreement with Russia among others, and as a result, global oil production will decrease. It is estimated that up to 10%. “Everybody noticed that the oversupply is so high and the consumption is so small with dormant economies, that the price must be stimulated,” says Dr Jakub Bogucki, e-petrol.pl fuel market analyst. Wholesale prices have already increased slightly. And what about prices at the pump?
The deal of the biggest oil producers is already called historic. Not without reason – according to the assumptions, the extraction is to fall to the lowest levels in history. First estimates indicate that even by 10% globally.
According to the deal, oil production is to be reduced by 9.7 million barrels per day during the two-month period from 1 May to 30 June 2020. For the next six months, from 1 July to 31 December 2020, the reduction in production will reach 7.7 million barrels of oil per day. For the next 16 months, from 1 January 2021 to 30 April 2022, daily oil production will be reduced by 5.8 million barrels,” tvn24bis.pl reports, adding that the deal is to be valid until 1 April 2022.
If, of course, all countries will adhere to it, and this might be problematic as, e.g., during the course of negotiations Mexico refused to sign up to its share of cuts under the deal. Commentators also closely monitor the actions of the United States, which have announced a reduction in production and the purchase of oil from the market.
President Trump has so far eagerly applauded the restrictions imposed on other countries, but he himself was reluctant to introduce them to the USA,” says the e-petrol analyst.
However, if the deal is actually respected, it may affect oil prices, not only wholesale prices but also, consequently, those at the pump. The supply of oil has been reduced to stabilise the prices, which have been falling sharply, almost since the beginning of the coronavirus pandemic.