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a name="8"> Global Crisis in the Oil Sector International Virtual Meetings to Reduce Oil ProductionNews agencies report that the Organization of Petroleum Exporting Countries plus Russia (OPEC+), at an April 9 virtual meeting, agreed in principle to reduce oil production by 10 million barrels per day (bpd) during May and June. OPEC+ would then ease the cuts to 8 million bpd from July to December and relax them further to 6 million bpd between January 2021 and April 2022. The deal is contingent on oil producers outside OPEC+ reducing their oil production by 5 million bpd. The non-OPEC+ countries produce around 60 per cent of global oil supply and include the United States, China, Mexico, Canada, Norway and Brazil. The April 10 press release issued following the G20 Extraordinary Meeting of Energy Ministers does not contain any commitments, only a vague statement of support to "stabilize energy markets." The release says in part, "To underpin global economic recovery and to safeguard our energy markets, we commit to work together to develop collaborative policy responses. [...] We recognize the commitment of some producers to stabilize energy markets. We acknowledge the importance of international cooperation in ensuring the resilience of energy systems." The complete press release is available here. U.S. President Trump insists that the oil cuts in U.S. production will occur only as a result of market forces and not from government decree. His bluster is combined with a threat to eliminate oil imports into the U.S. by instituting an oil tariff high enough to keep U.S. oil prices insulated from the lower global price. According to the news agencies, this hard public persona has not carried over into the private global meetings where the U.S. appears to want some agreement. This is borne out in public with demands coming from powerful factions of the U.S. financial oligarchy for some sort of coordinated global cut in oil production, including even in the U.S. At any rate, the discussions are secret with the people only allowed to know select details. As with the backroom discussions in Canada over government grants to the privately-owned oil industry, the people are not privy to the give and take among the oil oligarchs and their political representatives. The horse-trading can include issues of great concern to the people, such as the current battle against the COVID-19 pandemic and the availability of personal protective equipment, and even issues of war and peace. Bloomberg News reports that it has seen the OPEC+
draft agreement, which has not been officially
released or endorsed by
the G20. Russia has reportedly agreed to cut 2
million bpd and Saudi
Arabia 4 million bpd off its record-setting April
production levels of
12.3 million bpd for a cap of 8.3 million bpd. La
Jornada
reports that Mexico and the U.S. had reached an
agreement based on
Mexico cutting 100,000 bpd, reducing its
production from 1.7 to 1.6
million bpd -- the most it said it could do, and
was prepared to hold
out for, against the pressure to cut 400,000 bpd
or 23 per cent of its
production. Mexican President Andrés Manuel López
Obrador said after he spoke to President Trump,
that the U.S. President
offered to cut U.S. production by an additional
250,000 bpd to
“compensate” for what Mexico was unable to do. To ensure compliance with the cuts, a draft
communiqué sent to G20 member countries, and
circulated
prior to the Thursday OPEC+ meeting, told members
that it would create
a special group to monitor compliance. The group
would not only monitor
compliance to the April 9 agreements, but would
also report back
to the G20 energy ministers "for further
corrective actions if needed."
In recent years, OPEC+ has managed to ensure
compliance with agreed upon
production levels but this began to unravel as oil
market prices fell
as a result of pressure from the surge of oil from
U.S. shale
production.
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The
Energy Ministers of the G20 group of the "largest
economies" held an
Extraordinary Meeting by video conference, April
10, on whether to
endorse or not the OPEC+ agreement to reduce oil
production. Global oil
supply has increased recently mainly as a result
of the U.S. doubling its
capacity to over 12 million bpd in ten years by
using hydraulic
fracturing to capture oil in shale. The global
oversupply reduced oil
market prices substantially to below what is
sustainable for many
producers. The COVID-19 pandemic has further
reduced demand, creating a
situation where oil storage is no longer feasible
and cuts in
production will have to occur with or without any
international
coordination.
