Yemisi Izuora
Given the recent agreement reached by the Organization of Petroleum Exporting Countries, OPEC+, OPEC countries are now expected to prune oil production by 2.7 million bpd in 2020 with Saudi Arabia to contribute a cut of around 500,000 bpd on average for the full year.
The OPEC oil additions led by the Gulf countries have been on an increasing trend until 2017, when the OPEC+ cut agreement was first initiated.
As the original agreement has been rolled over and the cuts deepened last year, total yearly oil production reduction from OPEC accounted for nearly 1.7 million bpd, largely driven by Saudi Arabia, Iran and other OPEC countries that have been declining naturally.
Thus, total OPEC oil production dropped to about 32 million bpd in 2019.
In March 2020, Saudi Arabia was not able to prolong an agreement with Russia, which led to OPEC+ collapse, a price war where each country aimed to ramp-up production as high as possible and oil prices barely above $30 per barrel.
However, the impact of Covid-19 on demand has been so disastrous that already in April 2020 OPEC+ has again agreed to cut production by a historical high of 10 million bpd over the next two months, later decreasing cuts to 8 million bpd for the remainder of 2020 and 6 million bpd from 2021 until April 2022.
The largest chunk of cuts will come from Saudi Arabia.
Total OPEC reduction is estimated to amount to over 2.7 million bpd in 2020, and total level is thus envisioned at 29.2 million bpd, gradually growing back to 34 million bpd by 2025, according to Energy360 reports.