- The United States, Brazil, Canada, and some other oil-producing countries cut production by 5 million barrels a day at the G20 summit.
- Brent crude fell to $71 in 2018, and $64 last year, but fell sharply due to the Coronavirus and collapse in oil demand.
- In the United States, shale oil is no longer economically viable.
Global oil demand has fallen by 30 million barrels a day due to the outbreak of the coronavirus, which has quarantined nearly half of the world’s population. Another result has been a sharp drop in the global economy, for which the world was seemingly overdue. However, OPEC Plus has only agreed to cut production by 10 million barrels for the two months of May and June of this year.
The United States, Brazil, Canada, and some other oil-producing countries cut production by 5 million barrels a day at the G20 summit.
OPEC Agreement and Allied Countries
According to the International Energy Agency, oil investment (exploration, production, and refining) in the world in 2010 was about $846 billion. This figure increased every year to an unprecedented $1.1 trillion in 2014. As a result, in the second half of this year, oil supply far outpaced demand and prices fell. Oil prices fell below $105 in the first half of 2014 to below $30 in early 2016, and eventually, OPEC and allied countries led by Russia decided to cut production to raise prices.
Brent crude fell to $71 in 2018, and $64 last year, but fell sharply due to the Coronavirus and collapse in oil demand. Additionally, the failure of the OPEC meeting and allied countries to cut oil production again in March played a role. In some days of last month, it even fell to about $20, as global oil demand fell by 30 million barrels a day, and the same amount of excess oil flowed into the markets every day.
The OPEC Plus complex had about 45 million barrels per day of oil production last month. If we compare the $68 oil price at the beginning of the year with the average oil price of $33 last month, it was $ 1.5 billion a day. It has been damaged. Such a huge amount of damage is not in the power of oil-producing countries.
Saudi Arabia, for example, needs oil prices above $82 to avoid budget deficits. For Russia, the figure is $41. Russia’s opposition to a further $1.5 million drop in OPEC oil production last month was a good omen for the United States and other countries to agree to cut production. US crude production rose 3 million barrels within three years that OPEC Plus cut production to more than 12,700,000 barrels, and its oil exports surpassed its imports this year.
With falling oil prices, however, US oil production has also been disrupted as part of the country’s oil production. Shale oil, in particular, is no longer economically viable, and the US Energy Information Administration has said that oil production this year is about the same as in 2019. That will be reduced by half a million barrels per day.
On the other hand, the sharp drop in oil revenues of the complex, which relies heavily on oil exports, has led to a sharp decline in imports, which has been challenging for other countries. China, the European Union and the United States are the world’s largest exporters.
The World Trade Organization (WTO) said in a report that global trade could shrink by 32 percent this year compared to last year. Last year, global trade in world goods was about $19 trillion, and the volume of trade in services was $ 6 trillion. The World Trade Organization (WTO) says North American exports may fall by as much as 41 percent and about 33 percent in East Asia and Europe, respectively.