Relief as OPEC+ ends oil price war agrees to cut 14mbpd

In a move to save the oil industry — facing the biggest crisis in its history — OPEC and Russia have agreed to an ultimate production cut of up to 14 million barrels per day (mbpd).

The coalition, known as OPEC+ agreed to eliminate 10 million barrels of crude per day for an initial two-month period to save a glutted oil market.

Though the new OPEC+ deal is not dependent on additional cuts from outside the group to move forward — such as the United States, Brazil and Canada — OPEC+ is hoping for additional cuts from these and other G20 countries.

The OPEC+ production cuts will begin in May. From July to December, overall production cuts will lower to 8 million barrels per day, followed by 6 million barrels per day from January 2021 to April 2022.

The fate of a new “OPEC++” deal, in which additional countries could sign up to production cuts, will be the focus of a virtual meeting of G20 energy ministers on Friday, with the US Energy Secretary Dan Brouillette among the global energy leaders expected to participate in the webinar. Alberta Energy Minister Sonya Savage was on Thursday’s OPEC+ call, a first for Canada.

The production cuts agreed to Thursday by OPEC member countries and OPEC+ countries, including Russia, will just run through June 10, when OPEC+ is set to meet again. Iran, Libya and Venezuela will be exempted from the production cuts. It also sees Saudi Arabia and Russia bearing the brunt of the cuts.

Despite the cuts, Brent crude was down 4 per cent at market close, losing pace from a nearly 11 per cent rally before the details of the deal were announced. Brent closed at $31.48 per barrel.

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