“Through the grace of Allah, and then with wise leadership, continuous efforts and ongoing conversations since dawn on Friday, we now announce the conclusion of the historic agreement to reduce OPEC members` production by about 10 million barrels of oil per day from May 1, 2020,” Dr. al-Fadhel wrote in a tweet. Russia is in much better financial shape than Saudi Arabia, especially with a flexible exchange rate – since the ruble depreciates, the value of its exports increases. While the price of oil would also lose billions of dollars in revenue, the government has a budget deficit well below that of Saudi Arabia and has $550 billion in foreign exchange reserves. “OPEC members are aware that there is no reasonable demand scenario that will consume such a large volume of oil in the coming years, so they recognize that they must be content with low prices or be constrained by continued production cuts,” Raj said. Saudi Aramco announced a reduction in capital expenditures from $35 billion to $40 billion to $25 billion to $30 billion. [55] The government also increased its debt ceiling from 30 to 50 per cent of GDP, both due to oil prices and the effects of the pandemic, and planned to reduce spending by 5 per cent as its budget deficit would increase from 6 per cent to 9 per cent. [56] The coronavirus is a new and greater challenge, and it was expanded last month, when Russia and Saudi Arabia began their quarrel. Russian oil officials said they were tired of losing market share at the price of U.S.

producers. Saudi Arabia returned the favor by promising to pour more oil into the market and temporarily took prices at about $20 a barrel, less than half of what it had recorded at the beginning of the year. Starting in 2014, U.S. shale oil production increased its market share; While other producers continued to produce oil,[11][12] prices rose from more than $114 per barrel in 2014 to about $27 in 2016. In September 2016, Saudi Arabia and Russia agreed on cooperation in oil price management and created an informal alliance of OPEC and non-OPEC producers, known as OPEC. Until January 2020, OPEC had cut oil production by 2.1 million barrels per day (bpd), with Saudi Arabia making the largest reduction in production. [13] It was not clear, however, whether the reductions would be sufficient to support prices. Before the coronavirus crisis, 100 million barrels of oil were supplying world trade every day, but demand fell by about 35%.

Although the cuts agreed on Sunday are substantial, they remain well below what is needed to boost on-demand oil production. “The agreement represents the expectation of stability,” Ecuadorian energy minister and former OPEC secretary general Rene Ortiz said in an interview on Sunday. “But if the markets react accordingly, it`s another ball game.” Following the meeting originally scheduled for Tuesday, OPEC announced that it had agreed to proceed with the current production reduction of 7.7 million barrels per day to 7.2 million barrels per day from January.