OPEC+ ministers convene in Vienna to finalise ongoing production cut agreements

Ministers from more than 20 countries including OPEC members and other oil-exporting nations meet in Vienna today in hopes of

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Photo: Reuters

Ministers from more than 20 countries including OPEC members and other oil-exporting nations meet in Vienna today in hopes of finalising production cut agreements for the remaining fiscal quarters of 2020.

OPEC and allied producers (OPEC+) have agreed to cut output by 1.7 million barrels per day (bpd) due to industry slowdowns and decreased travel volume that has resulted in a supply surplus and lowered oil prices by 20%. Saudi Aramco has offered to cut an additional 400,000 bpd from its own quota to further ensure price stabilisation.

While OPEC is largely in agreement about the supply reductions, the main opposition comes from Russian companies that profit from the extraction of natural gas as a by-product of crude oil production. However, the meeting in Vienna itself signals that Russia and Saudi Arabia are approaching a compromise.

Assuming all producers adhere to the reductions, expect OPEC+ to ease the supply cuts later this year once demand has resuscitated. In the meantime, analysts predict a range of adverse effects on the oil market, as well as a hike in secondary product prices that have the potential for inflationary results should the cuts persist.

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