Covid-19 is an unseen beast that seems to be impacting everything in its path,” Mohammad Barkindo, OPEC’s secretary-general said in a speech at Thursday’s online gathering of OPEC+.
“The supply and demand fundamentals are horrifying” and the expected oversupply, particularly in the second quarter, is “beyond anything we have seen before,” he said.
Barkindo, the Nigerian who heads the oil cartel’s Vienna Secretariat urged action, from both OPEC+ producers and nations beyond the alliance, to tackle the growing surplus, which he estimated at 14.7 million barrels a day in the second quarter.
Russia has insisted that the U.S. in particular do more than just let market forces reduce its record production.
Trump, meanwhile, has said America’s cut will happen “automatically” as low prices put shale in dire straits, a sentiment reiterated by his energy secretary Thursday.
Separately, a senior administration official said the nation welcomed the proposed OPEC+ cuts, adding they would send a signal that all major oil-producing countries will respond in an orderly manner to market realities caused by the virus.
OPEC+’s tentative plan would see the output curbs tapering off after two months, depending on the evolution of the coronavirus.
The 10 million-barrel-a-day cut may shrink to 8 million a day from July and then 6 million a day from January 2021 to April 2022, according to the OPEC statement.
The group is planning another videoconference June 10 to discuss what additional measures need to be taken.
Saudi Arabia and Russia will apply reductions to a production baseline of about 11 million barrels a day, according to the OPEC statement.
For Saudi Arabia, that’s lower than recent output, which rose above 12 million a day in early April. Other countries would cut from their October 2018 levels.
The oil price war, which started in March after the collapse of previous OPEC+ talks, lasted exactly 31 days, far fewer than similar feuds in 1986, 1998 and 2016.
But in that short period, it has forced companies from Big Oil giants to U.S. shale independents to slash spending, fire workers and cancel projects. Meanwhile, oil-rich countries have gone cap-in-hand to the International Monetary Fund and the World Bank for help, hobbled by low prices.
“For oil markets, the massive oil-demand contraction is unprecedented,” OPEC said in an internal document circulated to ministers and seen by Bloomberg. “The current outlook looks extremely bleak, with oil markets anticipated to be severely tested on many fronts.”