Washington/Riyadh: – Following the agreement between OPEC and Russia regarding a historic cut in the crude oil production, there are indications of a fuel price rise in the international market. The rates of US crude rose by 2.6% on Monday, and it is claimed that there will be a further improvement in rates shortly. Meanwhile, US President Donald Trump welcomed the decision of OPEC. Trump expressed confidence that this decision will strengthen the oil sector.
There has been a significant decline in the crude oil rates since the last few weeks. It was clear that the disagreement between OPEC, the association of the oil-producing countries and Russia was the reason for the fall. Saudi had demanded a cut in oil production and Russia had dismissed the demand. Therefore, the oil production had been increased, instead of decreasing, since the onset of the Coronavirus pandemic, despite a huge fall in demand. Concerns were being expressed that if this condition continued, crude oil rates would dip to the levels of USD 10 per barrel.
US President Trump had held discussions with many OPEC members, Russia and other oil-producing countries, requesting them to find a solution.
Against this background, talks were being held between Russia and OPEC since the last few days. Saudi Arabia and Russia were playing an essential role in the discussions. It was inferred in the meeting that the oil rates would not improve unless there is a reduction in oil production. But Russia and Saudi Arabia differed on the amount of cut in the production. But after a long-drawn discussion, Russia and Saudi come to an agreement over the issue.
Accordingly, OPEC and its affiliates will reduce oil production by 9.7 million barrels per day. This is the first instance of such a massive cut in production in the history of the OPEC countries. The production cut will be applicable from the 1st May and will continue till 30th June. On 1st July, the cut will be reduced by 2 million barrels to 7.7 million barrels per day. Thereafter, the reduced production will continue till the end of the year. OPEC informed that from January this cut would be reduced to 5.8 million barrels per day.
It is claimed that the effects of the decision taken by OPEC will be visible in the international oil markets. US President Trump welcomed the agreement between the OPEC countries and Russia. President Trump congratulated Russian President Vladimir Putin and Saudi Arabian Crown Prince Mohammed Bin Salman on the development.