Against falling prices for crude oil, Opec extends funding throttling
It is a tightrope act: On the one hand, the Opec countries want to stabilize oil prices. On the other hand, these must not rise too much – because that would strengthen US producers. The current curtailment of funding is still being extended by one month.
To stabilize the oil market, Opec and its cooperation partners; (Opec +) will extend the current cut in their oil production by another month. This was announced by the oil cartel after negotiations in Vienna. The participating countries voted for oil production to be cut by around ten million barrels (159 liters each) in July, too.
The cartel further said that the existing agreement had contributed to a “preliminary recovery in the global economy and the oil market”. All major producers should now continue to commit to stabilizing the market.
The major oil-producing countries want to take the step to stop the price decline in the corona crisis. The Organization of Petroleum-producing States (Opec) and the other countries agreed in April to cut oil production by 9.7 million barrels (159 liters each) per day for May and June. Opec expects a sharp drop in oil consumption due to the economic consequences of the corona crisis. Throttling should make prices fall again.
the market is still fragile and needs support
After the end of the negotiations, Russian energy minister Alexander Nowak emphasized that the targets had to be met 100 percent in July. “We see a positive effect of the joint action, but the market is still fragile and needs support,” he said, according to the Tass agency. The agreements should now continue to have a positive impact on the stabilization of the energy market; said Kremlin spokesman Dmitri Peskow.
Market observers had expected Opec to agree and the throttling to be extended by one month. However, the cartel does not want to push prices up too much. That could put the US competition back into play; which could produce at a price beyond 40 dollars a barrel to cover costs.
With a sharp rise in oil prices, Opec would dig its own grave, emphasized Commerzbank expert Eugen Weinberg. Countries that have produced more than they should in the past month have promised to meet their commitments in the future; he said, referring to Iraq, Nigeria, Angola, and Kazakhstan. Nigeria had confirmed its willingness to comply with the agreement at the start of the talks.