The agreement between OPEC and a number of countries outside the organization (OPEC +) on the reduction of oil production has been in force since the beginning of 2017 . It was repeatedly extended, conditions changed. So, until the end of 2019, the agreement provided for a decrease in production by 1.2 million barrels per day from the level of October 2018, and in the first quarter of 2020, the alliance reduced production by 1.7 million barrels.
At the beginning of March 2020, the OPEC + countries were unable to agree either to change the parameters of the transaction to reduce oil production, or to extend it. Moscow did not agree with the cartel’s proposal to further reduce production due to the spread of coronavirus and proposed to maintain the existing conditions. Saudi Arabia, in turn, insisted on an additional reduction in oil production. As a result, from April 1, restrictions on the development in the member countries of the former alliance were lifted . This, along with the coronavirus pandemic, caused a collapse in the oil market.
On April 9, OPEC + countries resumed dialogue on reducing oil production to stabilize the market. The meeting, which was also attended by states outside the alliance (in particular, Canada, Norway), was held in a video conference format due to security measures in connection with the pandemic.
In total, the meeting lasted about 10 hours. As a result of the negotiations, a declaration was adopted in which the OPEC + participants pledged to reduce production in May-June by a total of ten million barrels per day, however, for the transaction to enter into force, the consent of Mexico, which did not support the terms and conditions, was required.
Mexico and other OPEC + participants diverged in position on the base level of the benchmark reduction in production under the new agreement. Mexican authorities did not agree to a three-stage quota for the OPEC + deal with a reduction in production in May-June by 400 thousand barrels per day from October 2018, expressing readiness to reduce production by only 100 thousand barrels.
Discussion of the issue continued on April 10 based on the G20 format. Following the meeting, G20 energy ministers pledged to take immediate measures to ensure the stability of the energy market amid the coronavirus pandemic. At the same time, the final communiqué was adopted without mentioning any quotas for reducing oil production.
On April 12, OPEC + reached a final deal to reduce oil production. Among the 23 parties to the transaction are ten OPEC countries: Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iraq, Kuwait, Nigeria, Saudi Arabia and the UAE. Ten more states are not included in the cartel: Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan and South Sudan. Three more OPEC members – Iran, Libya, and Venezuela – are exempted from cuts in production due to political issues.
In accordance with the agreements reached, the reduction in production in May-June will total 9.7 million barrels per day . Further production will be restored, from July to December 2020, the reduction will be 7.7 million barrels per day, and from January 2021 to April 2022 – 5.7 million barrels per day. The base of reference was taken in October 2018 , but 11 million barrels per day were taken for the Russian Federation and Saudi Arabia, from which, by analogy with all, there is a decrease of 23%, 18% and 14%, respectively. Mexico insisted on certain conditions: it reduces production by only 100 thousand barrels per day in May-June, the remaining 300 thousand for it is reduced by the United States.
At the same time, Saudi Arabia, the UAE and Kuwait agreed to voluntarily reduce oil supplies by another 2 million barrels per day to help oil prices.
Russia in the framework of the new OPEC + agreement in May-June will reduce production by 2.5 million barrels per day from the agreed 9.7 million.
Countries outside OPEC + have promised to reduce their production by 4-5 million barrels per day in addition to alliance cuts.
According to Bloomberg, the United States, Brazil and Canada will reduce production by 3.7 million barrels per day, and another 1.3 million will come from other G20 countries.
Total commitments to reduce oil production from May 1 from the current level will be about 19 million barrels per day. This volume includes both OPEC + countries and the states of the International Energy Agency (IEA), such as the USA, Canada, Mexico, Norway and others.
Despite new agreements, oil continues to rapidly fall in price. On April 20, for the first time in history, the price of WTI crude oil (with delivery in May) fell to negative values; according to trading results, NYMEX quotes fell by 300% to minus $ 37.63 per barrel, which was recorded as the contract execution price. Such a collapse was caused by weak demand for oil due to coronavirus and overcrowded oil storage facilities in the USA.
A number of countries amid a collapse in oil prices began to reduce production , without waiting for the entry into force of the OPEC + agreement. In particular, Algeria , Kuwait and Saudi Arabia .
Duty on oil export from Russia decreased by 7.6 times
The duty on oil exports from Russia from May 1 is reduced by 7.6 times – up to 6.8 dollars per ton, it follows from the calculations of the Ministry of Finance.
As a representative of the ministry told Bloomberg, this level is the lowest since 2002, when a new mechanism for export duties was introduced.
The average price of Urals oil for the period from March 15 to April 14 was $ 19 per barrel ($ 138.7 per ton) compared to $ 47.3 per barrel in the previous month of observation.
In connection with the new calculation formula adopted in the framework of the tax maneuver in the oil industry, from February 1, 2015, the preferential oil duty rate for a number of fields in East Siberia, the Caspian fields and the Prirazlomnoye field remains at zero level.
The duty on highly viscous oil is reduced to $ 1 from $ 5.2. The duty on light petroleum products and oils is reduced to $ 2 per ton, on dark – up to $ 6.8.
The duty on the export of commercial gasoline is reduced to $ 2, straight-run (naphtha) – up to $ 3.7 from $ 28.6 per ton. The duty on liquefied gas (SPBT) and on pure LPG fractions is reset. The coke duty is reduced to $ 0.4 from $ 3.3 per ton.