Oil industry applauds end to Saudi-Russia price war
A price war between Russia and Saudi Arabia that had tanked prices at the pump for weeks ended last week with the signing of an oil production cut agreement by OPEC+, a move that has been lauded by industry groups.
OPEC and its oil-producing allies finalized the largest single output cut in history over the weekend, pledging to cut 9.7 million barrels per day (bpd) come May. It is the result of a feud that has been ongoing since March when Saudi Arabia and Russia each asserted themselves to gain greater market share.
“We welcome today’s announcement of an agreement by other producing nations to follow the lead of the global marketplace – and U.S. producers – to reduce supply to align with lower energy demand as result of the pandemic,” Mike Sommers, president and CEO of the American Petroleum Institute, said. “This is a significant agreement that will foster increased stability in energy markets to the benefit of both American energy consumers and producers.”
The situation has been exacerbated by the global struggle to contain COVID-19, a disease that has spawned a pandemic and tanked markets worldwide in the process. Before its appearance, Sommers noted, the world demanded 100 million barrels of oil per day for a variety of things, from transportation to manufacturing. With the production agreement locked in, the industry hopes that long-term demand will remain strong — something projections have demonstrated.
The American Fuel and Petrochemical Manufacturers (AFPM) likewise shared optimism over the agreement, crediting President Donald Trump for its execution. Trump was heavily invested in brokering an agreement between the two sides in the price war.
“We’re pleased that the President successfully negotiated a diplomatic end to the global oil price war in a manner that helps U.S. producers and avoids imposing added costs on U.S. refiners,” AFPM President and CEO Chet Thompson said. “America’s refining sector is the most competitive and resilient in the world, and as recovery comes from this historic pandemic, we will remain well-positioned because of free market policies to deliver the fuels and petrochemicals that serve as the backbone of the global economy.”
The cut in production will run at the 9.7 million bpd rate from May 1 through the end of June. After that, production cuts will trickle down to 7.7 million bpd through the end of 2020 and 5.8 million bpd from January 2021 through April 2022.
While further action may come, Sommers indicated U.S. producers are ready to meet demands, whatever they might be.
