April 10, 2020 [New York Times – Published on April 10, 2020] – The Organization of the Petroleum Exporting Countries and other countries including Russia reached a tentative agreement on Thursday to temporarily cut large volumes of production, according to a person with knowledge of the matter.
OPEC and the other oil-producing countries agreed to cut about 10 million barrels a day, or about 10 percent from normal production levels, in May and June, said this person, who spoke on condition of anonymity because the announcement had not been made official.
Possible further trims could come from a meeting of the Group of 20 nations on Friday.
Negotiations hit a snag late Thursday over Mexico’s reluctance to cut its share of oil, reportedly 400,000 barrels a day, leaving the deal in limbo.
Even before that happened, oil prices fell because analysts and traders had hoped for a bigger reduction to prevent the buildup of a glut of oil. On Thursday afternoon, the West Texas Intermediate crude future contract, the American benchmark, was down more than 7 percent to $23.28 a barrel.
Amrita Sen, chief oil analyst at Energy Aspects, a research firm, said markets would not be impressed by the deal.
In addition, the new cuts won’t begin until May, allowing oil supplies to increase. There are also doubts about whether some of the countries party to the cuts, like Iraq, which often produces whatever it can, will really observe them. Ms. Sen said that OPEC and its collaborators were largely doing what they would be forced to do anyway.
Still, the meeting appears to be at least a start at tackling the most serious problem the oil industry and OPEC countries have encountered in decades. The decision to cut might go some way toward assuaging growing tensions between members of the cartel and the United States.
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