A week-long marathon of ministerial video conferences and bilateral calls brought the Group of 20 nations and OPEC+ together for an unprecedented agreement. Nevertheless, crude was down about 2% in London, after swinging wildly in the first few minutes of trading.
The focus of the market is now shifting whether the cut will be enough to dent the massive supply glut. As the virus shuts down the global economy, it keeps growing. On Monday, consultant JBC Energy GmbH said in a note that the deal might turn out to be a plaster on an open wound.
The agreement still represents a decisive victory for the alliance between allies, including Russia and the Organization of Petroleum Exporting Countries. Nevertheless, because of resistance from Mexico, talks were almost falling apart late last week after a weekend of urgent diplomacy. Moreover, the intervention from President Donald Trump helped to broker the final compromise.
Ed Morse is a veteran oil watcher who is head of commodities research at Citigroup Inc. He said that unprecedented times need unprecedented measures. He added that the United States played a vital role in brokering between Russia and Saudi Arabia for the new OPEC+ accord. Moreover, it is unprecedented in historical discussions of production cuts.
Abdulaziz bin Salman is the Saudi Energy Minister Prince. He said that they have demonstrated that OPEC+ is alive and up. Minutes after the deal was done, Salman had an interview with Bloomberg News. Salman said that he was more than happy.
OPEC+
Demand for diesel, jet fuel, and gasoline is collapsing. Moreover, the virus paralyzes ground and air travel. That is threatening the future of the United States shale industry. Furthermore, it squeezes the flow of petrodollars through an ailing global economy.
Oil producers in the G-20 will contribute their output reductions, on top of the OPEC+ agreement. Nevertheless, those measures are in no way equivalent to the immediate cuts which carter promised.
Moreover, production declines will count because of the effects of low prices in Canada, Brazil, and the United States. G-20 states contribute 1.3 million, and the global supply reduction is by 3.7 million barrels a day. Nevertheless, to come into effect, those curbs could take months, perhaps more than a year. Moreover, if crude prices recover significantly, it might not happen at all.
The G-20 state’s activity still has typically been critical of OPEC+.
Jason Kenney is the premier of Alberta. Alberta is the most prominent oil-producing province of Canada.
He said in a Twitter post that OPEC+ started the fire. Thus, it was their responsibility to finish it. He adds that many challenging months are coming with huge inventories and low demand. Nevertheless, there is at least a path to recovery.
In this situation, the biggest winner is the United States President Donald Trump. He refused to cut American oil production actively. Moreover, he brokered the deal over phone calls. Phone calls included Russian President Vladimir Putin and Saudi Arabia King Salman.
Moreover, Mexico won a diplomatic victory with the United States President’s help.
