the government of Saudi Arabia started out in the reduction of oil production before may 1, that is, the date specified in the transaction OPEC+. This is with reference to sources in the global oil industry and an unnamed Saudi official says The Wall Street Journal.
the Kingdom panicked due to not having analogues in the history of the fall of prices for raw materials. On Monday evening the American may futures of WTI crude oil fell to minus $ 40 per barrel, so the seller offered to pay to the buyer.
According to the representative of Riyadh, this “bloodbath” we need to do something, however, may already be too late.
the Possibility of early reduction of supply to consider and some other OPEC members, including question can bring up for discussion the entire organization. As for Saudi Arabia, its reduction depends on the legal obligations in the supply, which have already been agreed with customers.
In April, Saudi Arabia in the framework of the price war significantly increased production to 12.3 million barrels per day. In may, she, like Russia, has pledged to not produce over 8.5 million barrels per day. The deal OPEC+ allows to remove from the market of 9.7 million barrels, but the market deemed this amount is insufficient.
Over the past week countries outside OPEC+ announced their own cuts, so the excess of supply over demand has reached record levels. According to estimates of international organizations, it is more than 25 million barrels.
the pandemic coronavirus and a sharp slowdown in the economy the demand for oil collapsed, and the storage capacity was not enough to accommodate the extracted raw materials. Therefore, traders of oil futures contracts on deliveries — for the first time appeared in a situation when by the moment of contract they have on hand will be the physical volume of oil that nobody can sell and who have nowhere to store.
the Cost of June futures on Brent and WTI is above $ 20 per barrel, but if the situation with the overflow storage can not resolve, it also threatens to fall to a negative value.
Russia and Saudi Arabia previously discussed additional measures to support the oil market. Probably it was about the reduction, but for Russian companies to remove from the market more will be extremely difficult. Against this background, in the short term the price of Russian Urals also dropped below zero.
