CBJ — The Organization of Petroleum Exporting Countries along with Russia and other leading oil-producing nations have agreed to cut oil production by about 9.7 million barrels per day, effective May 1.

The cut in output equates to about a 10% drop in production and is the largest in history.

The reason for cutting back is an effort to increase oil prices, which have plummeted due to both the ongoing over-production battle between Saudi Arabia and Russia and also due to the fact the entire world is using a lot less oil now given that most nations have varying degrees of lockdowns in place in response to fighting the COVID-19 pandemic and invoking social distancing policies.

Manufacturing plants are not in need of nearly as much energy with most on greatly reduced output capacity and or closed altogether. Private citizens are not traveling the way they normally would. Instead people are remaining at home, riding this out.

Mexico is only being asked to cut 100,000 barrels a month. That was initially a sticking point with some OPEC members but an agreement was finally reached on Sunday.

U.S. senators had warned Saudi Arabia to find a way to increase prices as American shale firms face far-higher production costs. Tensions have grown to the point that American troops have been deployed to the kingdom for the first time since the September 11, 2001 terrorist attacks over concerns of Iranian retaliation amid regional tensions. The U.S. has warned Iran that it will tolerate no attacks on any of its allies’ properties. It said it also will have zero tolerance for any so-called “accidents” that might occur.

U.S. Energy Secretary Dan Brouillette credited President Donald Trump’s leadership for Russia and Saudi Arabia finalizing what he called “a historic deal, ending a price war that has caused unprecedented uncertainty in global oil markets.”

Trump spoke to Russian President Vladimir Putin about the oil market and other issues. Putin says he fully supports Trump’s plan.

@CanBizJournal