OPEC plus continue talks to reach oil product cuts in effort to boost price

Representatives from OPEC and allied producers led by Russia will conduct a virtual meeting today to discuss oil supply cuts.

opec plus deal 1

Photo: Reuters/Leonhard Foeger

Representatives from OPEC and allied producers led by Russia will conduct a virtual meeting today to discuss oil supply cuts.

Oil prices hit a 30-year low on March 30 due to the steep drop in demand caused by COVID-19-related shutdowns as well as the failure of OPEC+ to extend a deal on output restrictions that expired on March 31. Riyadh is currently working to get Moscow to sign on to an agreement that will cut global oil production by 10%—about 10 million barrels per day (bpd).

The uncertainties of the COVID-19 pandemic will continue to take their toll on the price of oil. The longer a supply agreement is not reached, the more the price is likely to slip. Combined with pressure from Washington—in the form of possible tariffs—members are likely to reach a deal.

The greater economic concern for OPEC+ is a long-term fall in demand caused by an extended crisis. The International Energy Agency warned last Friday that a 10 million bpd cut would not be enough to offset declining demand. While lower oil prices benefit consumers, a drop could lead to a considerable economic hit for countries that depend upon oil as a major export—most visibly through energy industry layoffs.

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