By Eurasia Business News – April 20, 2020

Oil well - Source Pixabay

An oil well in the dawn, 2019 – Source : Pixabay

The state-run company Saudi Aramco announced on April 17 that it will reduce oil output to 8.5 million barrels per day from May 1st. That was confirmed by the OPEC.

OPEC + countries agreed on April 12 to reduce the global crude production and called on other major oil producers to provide contribution to efforts to stabilize the oil market, hit by a falling demand due to the coronavirus pandemics which caused the economics lockdowns of many countries.

OPEC + countries agreed to reduce oil production by 9.7 million bpd from 1 May 2020 to 30 June 2020. They will cut the oil output from 1 July 2020 to 31 December 2020 by 7.7 million bpd.

Read also : Russia confirms more time is needed after OPEC+ deal to stabilize oil prices

This six months period will be followed by a reduction by 5.7 million barrels per day for a period of 16 months, from 1 January 2021 to 30 April 2022.

The baseline for the quota calculation of this reduction is the oil production of October 2018, except for the Kingdom of Saudi Arabia and the Russian Federation, both with the same baseline level of 11.0 million barrels per day. The Declaration provides that the agreement will be valid until 30 April 2022. However, the extension of this agreement will be discussed during December 2021.

Under terms of this agreement, Saudi Arabia, the largest oil producer in the world, is expected to reduce production by 2.5 million bpd in May and June to 8.5 million bpd.

Read also : Leading oil producers confirmed historic OPEC+ deal to cut oil output

Global oil prices have collapsed amid economic turmoil caused by the COVID-19 pandemics around the world, along with an oversupply of crude and the Saudi-Russian price war started in early March.

Major oil producers confirmed on April 12 the final deal announced on April 9 after OPEC + talks with 23 countries, to cut global oil output in an attempt to stabilize the market. However, experts doubt that it will be enough to prevent a further fall in oil prices.

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