Actual oil output cut will be bigger than 15 mpbd due to 2018 baseline: Saudi source

Actual oil output cut will be bigger than 15 mpbd due to 2018 baseline: Saudi source

Global oil producers will soon announce a deal to reduce output by around 15 million barrels per day (bpd) from a baseline of October 2018 to cater for a slump in demand caused by the coronavirus pandemic, according to a Saudi oil industry source.

The cut, to be implemented on May 1, will actually remove more than 15 million bpd from the world market because several countries including Saudi Arabia and the UAE have recently increased output, the source added.

“There will be an announcement explaining the outcome of the reduction in terms of quantities. It will be in the area of 15 million barrels per day, but the exact number is not finalized,” the source told Al Arabiya English.

“The cut from current production will be much bigger than 15 million,” he added.

The 15 million number was initially floated by US President Donald Trump as the upper end of the range of expected cuts in oil output in response to the collapse in oil consumption.

The Organization of the Petroleum Exporting Countries (OPEC) and allied nations on Thursday announced an agreement to cut 10 million bpd from a baseline of October 2018 for most countries, while Saudi Arabia and Russia both have a baseline of 11 million bpd, OPEC said in a statement. The agreement is conditional on Mexico cutting 400,000 bpd of its production, which it initially balked at.

Energy ministers from the Group of 20 most advanced economies held a conference call on Friday to discuss further cuts, but no figure was announced.

Mexican President Andres Manuel Lopez Obrador said on Friday that US President Donald Trump agreed to cut an additional 250,000 bpd on top of any other reduction on Mexico’s behalf.

Oil demand is expected to fall by 20 million bpd in April and 12 million bpd on average in the second quarter, according to estimates used by OPEC.

But there is still great uncertainty about the future as much the global economy grinds to a halt with much of the world in lockdown.

Analysts said any deal would be difficult to enforce.

“Monitoring and compliance will be very challenging,” said Omar Al-Ubaidly, a researcher at Derasat in Bahrain.

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