On the evening of the 10th, Beijing time, Mexico agreed to temporarily reduce production and supported the "OPEC +" production reduction agreement. So far, the "OPEC +" oil-producing countries have reached a preliminary agreement on reducing production. Among them, Russia and Saudi Arabia shared the largest share of the reduction in output.
According to the agreement, the output will be reduced by 10 million barrels / day for two months from May 1, 2020; from July 2020, the output will be reduced by 8 million barrels / day to December; and the output will be reduced by 6 million from January 2021 Barrels / day until April 2022.
At the same time, Russia insists that other countries, especially the United States, should take the initiative to reduce production, not just gradually reduce production under the influence of market forces. But Trump insisted that the cut in the United States will happen "automatically" because of the low oil prices that have put shale oil companies in trouble. US Energy Secretary Blauet said on Thursday that weakening demand has led to a reduction in US output, and this year's output is expected to fall by 2 million barrels per day.
News of the conference was flying everywhere, and Mexico once became the focus
The negotiation process for the preliminary agreement was not smooth. The record-breaking agreement between Saudi Arabia and Russia, which was easily reached, unexpectedly suffered setbacks. After more than nine hours of negotiations, Mexico refused to accept its production cut quota and withdrew from the discussion without signing.
Mexico ’s Energy Minister Rocio Nahle Garcia said in a Twitter statement that Mexico proposed to cut oil production by 100,000 barrels per day, while OPEC plans to require Mexico to reduce production by 400,000 barrels per day.
During the meeting, Mexico said that it was only capable of reducing production by 100,000 barrels / day, and finally negotiated to adjust it to 350,000 barrels / day. Then Trump said that the United States would reduce production by an additional 250,000 barrels / day to share the pressure of Mexico. 10,000 barrels per day. Mexico may return to the United States in other ways.
Insufficient demand, low oil prices may continue
In fact, the biggest problem that plagues crude oil is insufficient demand.
Affected by the epidemic, since March, many countries in the world have shut down their economies. Goldman Sachs predicts that global oil demand in the second quarter will decline sharply by 14 million barrels per day from the same period last year.
This is why Goldman Sachs proposed that even if the OPEC + meeting reached a production cut of 10 million barrels per day, it would not be enough to improve the balance of supply and demand in the oil market. "Ultimately, the magnitude of the plunge in demand is too large for OPEC's coordinated production cuts."
Russian Energy Minister Novak said that due to the decline in global economic activity, crude oil demand fell by 10-15 million barrels per day.
OPEC + documents show that global crude oil demand is expected to fall by 12 million barrels / day in the second quarter of 2020. Global crude oil demand is expected to shrink by 6.8 million barrels / day in 2020.
Due to the rapid decline in demand, the rise in crude oil inventories has far exceeded expectations.
On Tuesday, the US Energy Information Administration (EIA) released a report showing that as of the week of April 3, US EIA crude oil inventories increased to 15.177 million barrels per day, much higher than the previous forecast of 9.699 million barrels. Gasoline inventories increased to 10.497 million barrels. Refined oil inventories increased to 476,000 barrels, while it is estimated to increase by about 697,000 barrels.
At present, the global oil supply exceeds 25 million to 30 million barrels a day, and the price of crude oil under supply and demand is slashing. The price is hovering at the front line of US $ 20.
The International Monetary Fund (IMF) said it expects the world ’s worst recession since the Great Depression in 2020; it is expected that there will be negative GDP growth in more than 170 countries this year.
Bjornar Tonhaugen, head of oil markets at Rystad Energy, said: "Even if a production cut agreement is reached, it will definitely boost oil prices in the short term. We believe that this enthusiasm will fade one day and the reality of the scale of demand imbalance will eventually impact the market.
Goldman Sachs said that it is expected that the short-term risk of WTI crude oil will fall to $ 20 per barrel.
