The PRICE Futures Group senior market analyst Phil Flynn on the world’s major oil producers finalizing a historic production cut.
President Trump played a key role in the historic agreement between the world’s largest oil producers that trims global production by nearly 10 percent, according to Energy Secretary Dan Brouillette.
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The deal reached by the so-called OPEC+ group, which ends the price war between Saudi Arabia and Russia, reduces global output by 9.7 million barrels per day in May and June, helping to ease a global gut exacerbated by the COVID-19 pandemic.
Production will also be reduced by 8 million bpd from July through December and 6 million bpd from January 2021 through April 2022.
OIL TRIMS EARLY GAINS DESPITE DEAL BETWEEN SAUDI ARABIA, RUSSIA
Trump was “personally involved throughout the process” and “showed his skill at dealmaking,” Brouillette told reporters on a Sunday evening conference call.
Trump did not make any specific promises on behalf of U.S. production, according to Brouillette, who noted that Mexico agreed to cut output by 100,000 bpd in May and June and the “reduction of production within the United States will subsume whatever agreement the Mexicans would have been required to agree to under OPEC+.”
The production cut gives so much needed relief to a U.S. shale patch that has been devastated as West Texas Intermediate crude oil has plunged 62 percent this year, putting many companies in the sector on the brink of extinction. The S&P 500 Energy sector has seen its market capitalization fall by over 44 percent this year to under $538 billion.
“This is a significant agreement that will foster increased stability in energy markets to the benefit of both American energy consumers and producers,” Mike Sommers, president and CEO of the American Petroleum Institute, said in a statement.
Crude prices have firmed following Sunday’s announcement with WTI for June trading up 1.76 percent at $23.16 a barrel on Monday morning after having fallen by as much as 3.21 percent overnight.
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“We have already seen the start of Chapter 11 bankruptcy filings, and access to capital is getting very constricted for smaller energy companies,” Stewart Glickman, energy equity analyst at the New York-based CFRA Research, told FOX Business, adding that an “industry shakeout” is looming if the deal collapses.
FOX Business’ Blake Burman contributed to this report
