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Opec-Plus May Extend Megacut to Year's End

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The Opec-plus alliance may extend May and June oil production cuts of almost 10 million barrels per day through the end of this year, an Opec delegate tells Energy Intelligence. The delegate said a proposal to that effect would be discussed at the next Opec-plus video-link meeting in June. Saudi Arabia, Russia and other members of the alliance have recently started implementing the largest ever coordinated production cuts to boost oil prices after the coronavirus pandemic caused demand to collapse in March and April. Under an agreement reached last month, Opec-plus pledged cuts of 9.7 million b/d in May and June, 7.7 million b/d in the second half of 2020 and 5.8 million b/d from January 2021 through April 2022 (IOD Apr.14'20). But the Opec delegate said there is now a proposal to maintain the higher level of cuts in May and June through the end of this year, which amounts to an additional 2 million b/d in the second half of this year. To further support a recovery in oil prices, Saudi Arabia, Kuwait and the United Arab Emirates recently announced additional voluntary output cuts of nearly 1.2 million b/d for the month of June alone (IOD May12'20). Oman's Oil Minister Mohammed al-Rumhy tells Energy Intelligence that the sultanate also plans to cut an additional 10,000-15,000 b/d in June as part of the voluntary initiative involving the Saudis, Kuwait and the UAE. Sultan al-Jaber, CEO of Abu Dhabi National Oil Co. (Adnoc), said on Friday there are signs that the oil market has tightened in recent weeks and that the balance between supply and demand will be restored over time. "The Opec-plus agreement, voluntary cuts ... and production shut-ins are working together to start to rebalance the market. This will take time. As economies begin to open up, demand will follow, but the path to the next normal is not a straight line," he said in a statement released by Adnoc. In its latest monthly Oil Market Report, the International Energy Agency (IEA) increased its projections for global oil demand this year, while also noting that the US and other countries outside the Opec-plus alliance have been making substantial cuts in production (IOD May15'20). "Globally we see early signs of a gradual rebalancing of oil markets," said IEA Executive Director Fatih Birol. But he added that the nascent recovery is both "gradual" and "fragile." Amena Bakr, Dubai, with Tom Pepper, London

Topics:
Oil Demand, Oil Supply
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