Cut 10 Million Barrels A Day! International Oil Prices Skyrocketed And Plummeted. Crude Oil Market Staged "Romance Of The Three Kingdoms"

OPEC and major oil producing countries have reached initial intention to cut production.

The emergency meeting between OPEC and non OPEC oil producers held by Saudi Arabia ended early in the morning of 10 hours in Beijing, and the meeting reached a preliminary intention to cut production. According to the announcement just now, the oil producing countries have reached an agreement that they will reduce output by 10 million barrels per day from May this year, and the first round of production will be two months long. Since July, the second round of production has been cut by 8 million barrels per day until the end of this year. Finally, from next year, January 2021, the production will be reduced by 10 million barrels per day. International oil prices skyrocketed and plummeted. Crude oil market staged "Romance of the Three Kingdoms", what abacus? The three rounds of production were reduced by 6 million barrels per day until April 2022.

The meeting was held in the form of video conference. Saudi energy minister Abdul Aziz told the media after the meeting that Saudi Arabia is ready to push ahead with the implementation of the reduction in production after the expiration of the agreement.

In his opening speech, Mohamed Akab, OPEC's rotating chairman and Algeria's energy minister, stressed that the current outbreak of the new crown pneumonia worldwide has caused major damage to the world economy and the global oil market. The serious imbalance between the supply and demand of crude oil has had a great negative impact on the income of oil exporting countries, and all countries should seek to build in a responsible manner. A sexual solution to rebalance the global oil market.

The new crown outbreak led to a sharp drop in global oil demand. In early March, OPEC failed to reach a reduction agreement with Russia's non OPEC oil producing countries. Then the oil price war between Saudi Arabia and Russia, the world's largest oil exporter, intensified further, leading to oversupply expectations and a fall in oil prices.

According to analysis, there will be an oversupply of 25 million barrels or 30 million barrels of crude oil per day in May this year, which means that after the agreement of 10 million barrels per day reduction in production, The international crude oil market is still in excess of demand, and this situation may not change fundamentally before the outbreak of the epidemic in the world, especially in the European and American countries.

The scale of production cuts is insufficient, and international oil prices are soaring and plummeting.

Although OPEC and Russia and other oil producing countries have reached a principled reduction agreement on the 9 th day, But market participants believe that the scale of production cuts is not enough to compensate for the sharp decline in global oil demand.

In fact, the contents of the agreement have been revealed to the media by the insiders of OPEC within hours before closing. Initially, Reuters quoted two sources as saying that the maximum daily production could be 20 million barrels. Therefore, this figure triggered a surge in oil prices. The US Dezhou West light crude oil WTI rose by 12%. Previously, the market expected to be reduced by 10 million to 15 million barrels per day, and now the market is expected to be mobilized to the expected high. The next thing, however, is that Bloomberg also quoted OPEC representatives as saying that the first round of production cuts was only 10 million barrels per day. Immediately, oil prices plunged rapidly.

As of the end of the day, the New York Mercantile Exchange delivered light crude oil futures in May, down 2.33 U.S. dollars, closing at $22.76 a barrel, or 9.29%. Brent crude oil futures for June delivery fell 1.36 US dollars to close at $31.48 a barrel, or 4.14%.

International crude oil market staged "Romance of Three Kingdoms"

After Saudi Arabia launched the first crude oil price war in early March, global oil prices plummeted. Subsequently, Saudi Arabia, Russia and the United States, the three oil producing countries, frequently voicing their voices around the issue of oil production reduction, causing difficulties in each other and triggering the international crude oil market turbulence. In the meantime, the three parties' considerations are thought-provoking.

Saudi Arabia, the world's major oil producer and largest exporter, pioneered a price war. The target seems to be directly referring to Russia and other non OPEC oil producing countries. We hope to push Russia back to the negotiating table and agree to cut production and push oil prices back to high level. In addition, Saudi Arabia also intends to take this opportunity to suppress high cost oil and gas such as shale oil and expand its market share. Saudi Arabia is therefore prepared for the fall in oil prices. According to media reports, before the March 6th meeting between OPEC and non OPEC oil producers, Saudi Arabia's Ministry of finance has asked the government to cut the budget by 20% to 30%, in order to cope with the impact of the drop in oil prices.

Over the past three years, Russia and OPEC have limited production and are the most non OPEC producers, but the market share has been almost grabbed by us shale oil. At the Vienna conference in March, OPEC hoped Russia could cut 300 thousand barrels of crude oil a day, which was hard for Russia to accept. Russia has also intended to crack down on shale oil in the United States, and now it is affected by the epidemic. The development of shale oil industry in the United States is difficult. Russia just grabs the opportunity to lower oil prices and tries to grab market share. In addition, the good financial position also increased Russia's participation in the oil market. However, the sharp drop in oil prices will inevitably bring some pressure to the Russian government. Russian officials say fiscal deficits may come from this year's decline in oil and gas revenues.

Saudi Arabia and Russia "fight", the deepest injury is the U.S. shale oil industry. Because of the higher cost of mining, some oil companies in the United States have begun to cut production. Data show that this week, American drilling operators will reduce the number of drilling rig by 58, to 504, the lowest level since December 2016. But while the adverse effects of shale oil industry are becoming more apparent, Americans also see a good opportunity to adjust their strategic oil reserves. US President Trump announced in March that the strategic oil reserve base would be re filled with crude oil with the opportunity of low oil prices. In recent days, the United States mediates with Russia and Saudi Arabia, hoping to end the price war as soon as possible, so as to save the US shale oil industry. At the same time, some members of the United States are continuing to push forward anti OPEC legislation, trying to put OPEC and member states under the control of the US Department of justice under the anti-monopoly law and further pressing OPEC.