Oil Production Cut Update: What To Expect Next From The Largest Suppliers
Ellen R. Wald, Ph.D | Apr 30, 2020 10:06AM ET
Oil prices, particularly WTI, continue to show extreme volatility. On Tuesday, Apr. 28 WTI jumped by over 30% on news that some U.S. states plan to ease the restrictions that have caused oil demand to fall and that U.S. crude oil inventories grew less than expected.
Still, both WTI and Brent prices remain severely depressed. Oil prices will only recover significantly when demand returns to near full strength.
Before the economic shutdowns, global oil demand was about 100 million bpd. Even as restrictions are gradually lifted, it will take many months to see demand restored to that level. One of the difficulties for anyone trying to forecast the growth rate of returning demand is the lack of precise information on how significantly demand has actually dropped so far.
However, there is a factor influencing oil markets that can be closely monitored: oil supplies. It must be understood that any reasonable production declines on the horizon won't be able to substantially lift prices in a way that demand growth will, given that the current glut is so large. Nevertheless, falling oil production will help lift prices, and we can anticipate seeing small jumps when news of a supply contraction comes out.
Here’s where production declines and cuts stand so far and what we can realistically expect from some of the world’s largest oil producers:
Saudi Arabia/h2
Oil production hit 12 million bpd in April, but Aramco (SE:2222) started to reduce production announced that it would trim slash production by 250,000 bpd starting in June and 134,000 bpd in the second half of 2020.
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