[Asia Economy Reporter Kwon Jae-hee] OPEC+ (Organization of the Petroleum Exporting Countries (OPEC) member countries and non-OPEC allies) has agreed to reduce production cuts to 7.7 million barrels per day starting in August.
On the 15th (local time), OPEC+ held a ministerial virtual meeting and decided to reduce the production cut amount by 2 million barrels per day compared to the 9.7 million barrels per day agreed upon for May to July, in response to the sharp decline in demand caused by the COVID-19 pandemic.
In other words, the amount of crude oil supplied by OPEC+ member oil-producing countries will increase by 2 million barrels per day starting in August.
This corresponds to 22% of the crude oil demand forecast for the third quarter of this year (92.22 million barrels per day) as predicted in a recent report by the Organization of the Petroleum Exporting Countries (OPEC).
Saudi Arabia's Energy Minister Abdulaziz bin Salman said, "If some oil-producing countries that did not meet their production cut quotas for May and June compensate for it, the production cut amount in August will be more than the agreed 7.7 million barrels per day." He added, "We expect that by reducing the production cuts amid the continuous recovery in oil demand, the increased supply will be absorbed."
OPEC+ held an emergency meeting in April as oil demand plummeted due to the COVID-19 pandemic and oil prices crashed, agreeing to reduce production by 9.7 million barrels per day for May and June. This helped OPEC+ raise oil prices.
They met again last month and agreed to maintain the same production cut amount in July and are currently implementing it.
Originally, OPEC+ planned to reduce production cuts to 7.7 million barrels per day from July to the end of this year, but seeing signs that the COVID-19 situation might prolong, they decided to extend the current level for one more month until July to maintain oil prices.
The production cut baseline is 11 million barrels per day for Saudi Arabia and Russia, and the October 2018 production levels for the other oil-producing countries.
According to the April agreement by OPEC+, member countries will reduce production by 5.8 million barrels per day from January next year to April 2022.
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