By Isaac Cohen*
Who could have predicted that the pandemic would push the United States to coordinate oil production with Saudi Arabia and the Organization of Petroleum Exporting Countries (OPEC) plus Russia.
Last February, crude prices started falling due to the measures to stop the spread of the corona virus in China, the world’s largest net oil importer. Thus, oil became the first commodity to fall victim of the drastic cut in demand caused by the shutdown of economic activity which started in the city of Wuhan.
With oil prices falling to around $30 per barrel, on March 5-6, Saudi Arabia and Russia could not agree on production cuts to stop the price fall, which signaled the end of their four year agreement to control production and sustain prices. This time, Russia was not willing to restrain production because the main beneficiary would be the United States, which at 13.3 million barrels per day has become the world’s main oil producer.
When prices fell 40 percent, close to $20 per barrel, last week President Donald Trump initiated conversations with President Vladimir Putin and the Saudi Prince Mohammed bin Salman. They reached an agreement announced last Sunday that this year will cut 7.7 million barrels per day (bpd), between July and December, followed by 5.8 million bpd between January 2021 and April 2022. The Energy Department estimated that, by the end of this year, US oil production will decrease at least 2 million bpd.
*International analyst and consultant, former Director ECLAC Washington. Commentator on economic and financial issues for CNN en Español TV and radio, UNIVISION, TELEMUNDO and other media.
