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


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

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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