On April 12, 2020, the Organization of the Petroleum Exporting Countries (OPEC) and Russia (also known as OPEC+) came to an agreement to cut oil production in an effort to stabilize the global oil market. The agreement has been widely praised for being the largest global oil production cut in history, with OPEC+ agreeing to cut nearly 10 million barrels per day in May and June.
OPEC+ is a partnership between OPEC and non-OPEC oil-producing nations, including Russia. The partnership was created in 2016 in response to the global oil glut caused by oversupply and weak demand. The goal of the partnership was to stabilize the market by agreeing to production cuts.
The current agreement is a response to the recent collapse of oil prices caused by the COVID-19 pandemic. As countries around the world have implemented lockdowns and social distancing measures, demand for oil has plummeted. This has caused an oversupply of oil, which has resulted in prices dropping to levels not seen since the early 2000s.
The OPEC+ agreement is aimed at reducing this oversupply by cutting production. Under the agreement, OPEC+ will cut production by 9.7 million barrels per day in May and June. This represents approximately 10% of global oil production, which is a significant reduction.
The agreement has been hailed as a victory for OPEC, which has been struggling in recent years to maintain its dominance in the global oil market. OPEC has been facing increased competition from non-OPEC countries, particularly the United States, which has become a major oil producer in recent years.
The agreement has also been praised for its potential to stabilize oil prices, which have been incredibly volatile in recent months. The price of Brent crude, the international benchmark for oil prices, has fluctuated wildly in recent weeks, dropping as low as $20 per barrel before recovering somewhat in response to the production cuts.
Overall, the OPEC+ agreement represents a significant step towards stabilizing the global oil market in the face of unprecedented challenges. While there are still many uncertainties ahead, including the potential for countries to cheat on the production cuts, the agreement has given many in the industry hope for the future. As the world continues to grapple with the COVID-19 pandemic, the OPEC+ agreement serves as a reminder of the importance of global cooperation in addressing common challenges.