…Cut from OPEC members will lower to 8mbd from July to December and then lower to 6mbd from January 2021 to April 2022.
The Energy International Agency (EIA) has said that global demand for oil and gas has decreased by about 30%, from over 100 million barrels per day to under 85 million barrels per day.
This followed the realization also that 40% of the world’s population are currently indoors to stem the spread of COVID-19.
EIA stated that the overall production cut from Organisation of Petroleum Exporting Countries (OPEC+) will lower to 8 million barrels per day from July to December and then lower to 6 million barrels per day from January 2021 to April 2022, this will follow an initial two-month period, running from May to June.
The OPEC+ group will meet again on 10 June 2020 to discuss further action, if arises.
At the just-concluded OPEC meeting virtual meeting, the oil body said that despite establishing the largest cut in its history, the OPEC+ deal was not enough on its own to bring stability to the oil price.
Brent was down by four per cent at market close on Thursday after the details of the meeting were announced, losing pace from a nearly 11 per cent rally earlier in the day.
That oil prices fell after the announcement of a 10 million barrel per day cut from the market shows exactly how glutted the oil market is, and that further action was necessary to bring some semblance of stability.
The IEA, which called for the G20 meeting of energy ministers argued the market conditions were too much for OPEC+ alone to handle.
“The extreme volatility we are seeing in oil market is detrimental to the global economy at a time when we can least afford it,” said Dr Fatih Birol, Executive Director of the IEA.
“Today’s oil crisis is a systematic shock that threatens global economic and financial stability. It requires a global answer.
That is why the G20 can be an indispensable forum for decisive leadership when it is urgently required,” he added.
Brent crude was averaging $55.70/barrel in February, but, with an oil price war and the impacts of COVID-19, both Brent and WTI have reached their lowest level in years, with Brent hitting $22.76 per barrel in March, its lowest price since November 2002.
As demand for oil, as well as the price of oil, has declined, storage capacity is also reaching its limits. In just a few weeks, analysts predict oil production may be shut-in due to a lack of global storage capacity.
Chibisi Ohakah
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