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Monday, January 18, 2021

OPEC+ (plus) solidarity is threatened into collapse (1/3)

 

(Japanese Version)

(Arabic Version)

Jan, 2021

 

1. Production cuts and prices of crude oil in 2020/21

 

 The average monthly price of Brent crude oil in January, 2020 was $ 64 per barrel[1], and Russia had been continuing to produce approximately 12 million barrels per day (B/D)[2]. Coronavirus disease (COVID-19) pandemic damaged the world economy seriously. Oil demand declined sharply. While Russia refused to cut production, Saudi Arabia increased production. As a result, oil prices plummeted to nearly one-third of $ 23 per barrel in April, 2020[3]. US spot market for WTI crude caused an abnormal situation in which oil prices temporarily became negative.

 

Taking the serious situation into consideration, OPEC and non-OPEC members, so-called OPEC+ (plus), decided on April 12, 2020 at the OPEC+ Ministerial Meeting (ONOMM) jointly to reduce production[4]. The production would be cut 9.7 million B/D from May to June and 7.7 million B / D from July to December 2020 and was 5.8 million B/D after 2021 until April 2022. The market regained stability. Average monthly Brent price soared to $40 per barrel in July and $50 per barrel in December, 2020, respectively.

 

2. Conflict and compromise between Russia and Saudi Arabia

 

Due to soaring oil prices, OPEC+ (plus) countries such as Russia strongly insisted to ease production cuts. But Saudi Arabia argued to be cautious because COVID-19 was still prevailing. Russia and Saudi Arabia disputed over the production levels after January 2021.

 

(cont’d)

 

By Areha Kazuya

E-mail: Arehakazuya1@gmail.com

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