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OPEC and allies agree to historic 10 million barrel per

day production cut
P U B L I S H E D T H U, A P R 9 2 0 2 0 • 8 : 5 9 A M E DT U P DAT E D F R I , A P R 1 0 2 0 2 0 • 1 2 : 1 8 A M E DT

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@ P I P PA S T E V E N S 1 3

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VIDEO 02:43

Reuters: Saudis, Russians reach deal on deep oil output cuts

A historic production cut agreement between OPEC and its allies, known as OPEC+, hit a
roadblock after Mexico refused to agree to its share of the cuts after a marathon meeting
between the oil-producing nations that lasted more than nine hours.

The other members of OPEC+, led by Saudi Arabia and Russia, earlier in the day agreed to
cuts that would take 10 million barrels per day offline as the coronavirus pandemic saps
demand for crude.
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A statement released by OPEC following the meeting outlined details of the cuts but notes
the measures were “agreed by all the OPEC and non-OPEC oil producing countries
participating in the Declaration of Cooperation, with the exception of Mexico, and as a
BREAKING
result, NEWS is conditional on the consent of Mexico.”
the agreement

The extraordinary meeting kicked off around 10:30 a.m. ET and stretched into the
evening.

Following the meeting, Mexico’s Secretary of Energy Rocío Nahle said in a tweet that the
country would be willing to cut production by 100,000 barrels per day for the next two
months. OPEC+ had reportedly asked for a cut of 400,000 barrels per day, according to
Reuters.

Rocío Nahle
@rocionahle

México en el consenso para estabilizar el precio del petróleo en

la reunión de la @OPECSecretariat ha propuesto una reducción

de 100 mil barriles por día en los próximos 2 meses. De 1.781

mbd de producción que reportamos en marzo del 2020

disminuiremos a 1.681 mbd. @GobiernoMX

9,858 8:55 PM - Apr 9, 2020

10.9K people are talking about this

OPEC said in a statement that the initial 10 million barrels per day cut would last in May
and June, before tapering to 8 million barrels per day for the rest of the year. Beginning in
January 2021, the cuts would decrease to 6 million barrels per day, which would continue
through April 2022, according to the statement.

The agreement was not contingent on nations outside of OPEC+ curbing production,
which some had suggested might be a stipulation for Saudi Arabia and Russia to scale back
production. The group did, however, call on other major producers to cut production in a
further bid to prop up prices.

Despite the record size of the potential cut, oil prices moved lower on Thursday as
investors feared it would still not be enough to combat the unprecedented demand loss
from the coronavirus.
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“Although 10 million bpd will help the market on the short term to not fill up storage, it is a
disappointing development for many, who still realize the size of the oil oversupply,”
said Rystad Energy’s head of oil markets Bjornar Tonhaugen.
BREAKING NEWS
U.S. West Texas Intermediate fell 9.29%, or $2.33, to settle at $22.76 per barrel. Earlier
in the session, the contract had been up more than 12% trade at a session high of $28.36.
International benchmark Brent crude slipped 4.14% to settle at $31.48, after earlier
hitting a high of $36.40.

“Covid-19 is an unseen beast that seems to be impacting everything in its path,” OPEC
Secretary General Mohammad Barkindo said at the meeting. “For the oil market, it has
completely up-ended market supply and demand fundamentals since we last met on 6
March,” he added.

Earlier WTI spiked more than 12% on reports that Saudi Arabia and Russia were
discussing cuts that could have taken 20 million barrels per day of global production
offline.

“The market has been underwhelmed by the proposed 10m/bd production cut, perhaps
because of early expectations of a massive 20m/bd reduction,” said Helima Croft, RBC’s
global head of commodities research. “However we contend that it is crucial to turn off the
tap off the tap in the midst of colossal demand crash and bring the price war to a swift
conclusion,” she added.

Ahead of the meeting, the Street had been watching for cuts in the 10 million to 15 million
barrels per day range after Trump said he had spoken to Russian President Vladimir Putin
and Saudi Crown Prince Mohammed bin Salman and expected them to announce a deal of
that size.

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 BREAKING NEWS

“We’re optimistic that they’ll reach an agreement between the Saudis and Russians in an
effort to stabilize the markets,” U.S. Energy Secretary Dan Brouillette said Thursday on
CNBC’s “Squawk Box” before the OPEC+ meeting kicked off. “I think they can easily get
to 10 million, perhaps even higher, and certainly higher if you include the other nations
who produce oil, nations like Canada and Brazil and others. Easily, easily done,” he
added.

Energy ministers from the Group of 20 major economies will convene for their own
extraordinary meeting on Friday, in which Energy Secretary Dan Brouillette will
participate.

The G-20 presidency said Tuesday that the meeting would be held “to foster global
dialogue and cooperation to ensure stable energy markets and enable a stronger global
economy.”

When it comes to U.S. energy companies, Trump has commented that market forces will
prevail, and on Wednesday said that producers have “already cut way back.” Brouillette
echoed this on Thursday, telling CNBC that the “demand downturn has led to production
cuts in the United States of about 2 million barrels per day thought the reminder of 2020.”

Oil prices crater

At OPEC’s last meeting in early March, de facto leader Saudi Arabia proposed cuts of 1.5
million barrels per day to combat falling demand. But OPEC-ally Russia rejected the
proposal, sparking a price war between the two powerhouse producers. Saudi Arabia
slashed its oil prices to gain market share, and also ramped up production to record levels
above 12 million barrels per day.
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Since early March, the outlook for oil has changed drastically as the pandemic spread, with
much of the world now staying home. Oil prices sank to their lowest level in nearly two
decades. WTI and Brent both fell more than 50% in March for their worst month on
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record. NEWS
The first quarter was also the worst in history, with WTI shedding 66%, while
Brent fell 65%.

Amid the decline, which has pressured highly-leveraged U.S. oil companies, Trump sought
to broker a deal between Saudi Arabia and Russia. On April 2 Trump told CNBC that he
had spoken to Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin
Salman and that he expected them to announce a record production cut.

American drillers are still pumping near record levels as the world is coming to the edge of
its ability to store oil. The U.S. oil industry is divided on whether it could or should
contribute to production cuts in an effort to stabilize prices.

The American Petroleum Industry opposes cuts, saying such a move would harm the U.S.
industry. In Texas, however, Ryan Sitton, one of the three members of the Texas Railroad
Commission, has said that the state would consider participating in such a deal.

— CNBC’s Christine Wang, Ted Kemp, Sam Meredith and Nate Rattner contributed reporting.

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