OPEC+ deal key to restore oil markets balance

Oil price drop threatens thousands of jobs – experts

KUWAIT CITY, April 15, (KUNA): The agreement between the Organization of Petroleum Exporting Countries (OPEC) and their allies to cut production by 9.9 million barrels per day would help strike a balance on oil markets, Kuwaiti experts have concurred.

In separate interviews with KUNA, the experts pointed out that oil prices have been plummeting sharply due to a remarkable drop in oil demand and an increase in crude production.

Oil expert Mohamad Al-Shatti, told KUNA that the global trade movement was gravely affected by the novel coronavirus (COVID-19) pandemic, as 70 percent of air navigation and 30 percent of individual traffic were disrupted and several governments announced economic packages to stimulate their economies and avoid recession.

Al-Shatti noted that the (OPEC +) agreement came in response to the COVID-19 outbreak impacts on global economy.

The US has taken the initiative to create a negotiations platform for OPEC and non-OPEC oil producers, mainly the Kingdom of Saudi Arabia and Russia, after their failure to reach an agreement early last month to reduce production by 1.5 million barrels, he explained.

He clarified that the US initiative came after Brent crude touched the price level of USD 15 a barrel, which is close to the operating cost.

Al-Shatti said that this drop poses a challenge to the oil industry and a threat to thousands of jobs around the world.

The OPEC + agreement will pave the way for price correction to reach a fair level that ensures the interests of both producers and consumers, he estimated.

He added that there will be cuts from outside (OPEC +), mainly from the (G20) countries including America, Canada, Brazil, and others.

He suggested that that these output reductions are directly related to low price levels.

Al-Shatti pointed out that the Citibank estimated these cuts at about three million barrels per day distributed equally between oil sands and oil shale, 300,000 barrels per day of oil from deep water and 500,000 barrels per day of heavy oil.

He stressed that Kuwait, Saudi Arabia and the UAE have made sacrifices to reach this agreement.

Considering output April as a basis for calculating each country’s reduction, Kuwait will cut production by one million barrels per day, Saudi Arabia by 3.8 million barrels per day, and the

United Arab Emirates by 1.66 million barrels per day, he clarified.

For his part, Jamal Al-Gharaballi, an oil and petrochemicals expert, said that the (OPEC +) agreement is necessary as OPEC has been working for years to ensure oil market stability.

Al-Gharaballi described the agreement a landmark that will have positive implications on markets.

He, however, noted hat its success depends on the commitment of all countries.

Its impacts on the markets will be seen on medium and long terms, he said.

Al-Gharaballi noted that the evidence indicates that the oil markets will witness price stability for a period of three months, and then the prices will improve with the decrease in global crude inventory and the gradual increase in consumption as well as easing and lifting of lockdowns imposed by countries due to the coronavirus epidemic.

Last week, the 9th extraordinary OPEC and non-OPEC Ministerial Meeting agreed to downsize oil production by 10 million barrel per day (bpd) to achieve and sustain a stable oil market and the mutual interest of producing nations.