Oil Agreement Saudi Russia

An additional wildcard is whether the non-OPEC producers who signed the agreement will actually respect it. Quotas for OPEC members are mandatory, but quotas for non-OPEC producers, such as Norway and Brazil, are voluntary, meaning they do not risk sanctions if they do not comply. There is no mechanism to control their compliance, as is the case for OPEC members, which makes it easier for non-OPEC members to ignore their quotas. As a result of the COVID 19 pandemic, plant production and transportation declined, which also led to a decline in aggregate oil demand and oil prices. [14] February 15, 2020, the International Energy Agency forecast that demand growth would fall to its lowest level since 2011, with growth of 325,000 barrels per day over the full year, to 825,000 barrels per day and a decline in consumption of 435,000 barrels per day in the first quarter. [15] Although global oil demand has declined, a drop in demand in Chinese markets, the largest since 2008, triggered an OPEC summit on March 5, 2020 in Vienna. At the summit, OPEC agreed to further reduce oil production by 1.5 million barrels per day by the second quarter of the year (an overall production cut of 3.6 million bpd from the original 2016 agreement), and the group is expected to review that policy on June 9 at its next meeting. [16] OPEC has asked Russia and other non-OPEC members to comply with OPEC`s decision. [13] On 6 March 2020, Russia rejected the request, marking the end of the unofficial partnership, as oil prices fell by 10% after the announcement. [17] [18] Under the agreement, members of the Organization of Petroleum Exporting Countries, as well as Russia and other countries, will increase production by 500,000 barrels per day in January and possibly by a similar amount in subsequent months.

The increase, less than 1% of the global oil market, comes at a time when demand is still under pressure from the coronavirus pandemic. The debacle was embarrassing for Russian President Vladimir Putin, who had to not only resign, but also approve of President Donald Trump`s efforts to negotiate a deal. The new negotiated agreement has only temporarily interrupted tensions between Saudi Arabia and Russia, but their war for global market share is likely to continue. The recent agreement is also different because its objective was not only to keep prices high, but also to prevent the global market from collapsing, as coronavirus decimated demand and the Saudis flooded the world with updated crude oil. Some of the lost demand will return when COVID-19 decreases as a threat, but the oversupply that held prices back before the epidemic will remain. A key question is: what will happen to relations between Saudi Arabia and Russia? Three years ago, Moscow`s agreement on the formation of the OPEC agreement with OPEC members stabilized oil prices. The price fight began on March 6, when Russia opposed a reduction in OPEC production of 1.5 million barrels per day. It ended five weeks later with an agreement that more than quadrupled the cuts – a record 9.7 million barrels.