The logo of the Organisation of the Petroleum Exporting Countries (OPEC). December 6, 2019. Reuters/Leonhard Foeger

THE NEUTRAL ZONE

On June 6, members of OPEC held a meeting to extend the 10M barrel cut by a month. As an effect of the pandemic cutting demand for oil, the decision was made as an effort to bring balance to the global oil market. Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman stated at the beginning of the meeting, “Today we have grounds to be cautiously optimistic about the future, but we are not out of the woods yet and challenges ahead remain to be seen.”

Russia and Saudi Arabia have decided to put their oil price war behind them for the sake of the world economy. Analysts state that the decision will not yet have an effect on oil prices as demand is still down for the year. OPEC hopes that this decision will help the world economy in the long run.

Even though the vote to extend got approved, some countries are struggling to deal with these cuts. Iraq, Nigeria, Angola, and Kazakhstan have already reported having issues with meeting May’s oil production cuts which have led to overall price discrepancy. This lead to Saudi Arabia threatening them, which resulted in an agreement from the four countries to compensate for the barrels they failed to remove in May, and the barrels they would fail to cut in June, by making bigger cuts in the next quarter. The next meeting is set for June 18 to evaluate the oil market and make another decision.

MEDIA PERSPECTIVE

  • OPEC and its allies reach deal to cut oil production through July – CNN – 6/6/2020
    • Members of OPEC and their allies, including Russia and Mexico, already had pledged to cut output by 9.7 million barrels a day in May and June, which has helped prop up oil prices as demand for crude begins to recover. It was the deepest cut ever agreed to by the world’s oil producers.
  • OPEC and allies to agree one-month extension to output cuts – Reuters – 6/6/2020
    • The delegate, who spoke on condition that he not be identified, said: “It is most likely that the meeting today will result in an extension of the agreement for one month only. This is the general trend within OPEC+.”
  • Opec output curbs spur US shale to ramp up production – Financial Times – 6/5/2020
    • Output could rise about 2m barrels a day, or 20 percent, between now and the end of August as the bulk of the supply shut down during the recent price crash is brought back on stream, according to analysts. 
  • OPEC, allied nations extend nearly 10M barrel cut by a month – Fox Business – 6/6/2020
    • The oil market was already oversupplied when Russia and OPEC failed to agree on output cuts in early March. Analysts say Russia refused to back even a moderate cut because it would have only served to help U.S. energy companies that were pumping at full capacity. Stalling would hurt American shale-oil producers and protect market share.

INFLUENCER PERSPECTIVE

  • RT on Twitter, 6/6/2020 The oil industry is having a terrible ‘fracking’ year.
  • Javier Blas on Twitter, 6/7/2020: CALENDAR NOTICE: The next OPEC+ meeting will take place Nov 30-Dec 1. But remember that from now on, the Joint Ministerial Monitoring Committee (a smaller overseen group that includes Saudi Arabia and Russia) will meet monthly to review the market, starting June 18 | #OOTT
  • Jason Bordoff  on Twitter, 6/6/2020: It’s still remarkable to see a Secretary of Energy celebrate OPEC cuts to push oil prices higher in an election year, a reminder of how dramatically the landscape has shifted in the last decade as the US became the world’s largest producer
  • Paul Wallace on Twitter, 6/6/2020: #OPEC+ meets today to extend output cuts that Trump says saved the US #oil industry. Key will be the stance of countries that pumped above their quotas in May — chiefly #Iraq, #Nigeria, #Kazakhstan & #Angola. Saudi Arabia & Russia aren’t happy with them.

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