It was just a few short weeks ago that Russia, which leads a consortium of oil-producing countries working in concert with OPEC to limit supply, refused to agree to a 600,000 barrel per day cut. Well, now the stakes are higher.
With global economic activity trending lower due to the spread of the coronavirus, oil prices are dropping like a rock. West Texas Intermediate oil trades around $46, and Brent Crude trades around $50.
To put a floor under oil prices and hopefully push them higher, OPEC ministers agreed to a 1.5 million barrel per day (bpd) cut in oil production. Iran is still exempt from the reduction.
OPEC wants the Russian group to cut production by 500,000 barrels per day, with OPEC members cutting the other one million barrels.
OPEC is still waiting for Russia to approve the cut. If they wait a little longer maybe they can cut by 2 million barrels per day, or even 3 million?
One group cheering on OPEC and the Russian group is American frackers. With oil and natural gas prices in the cellar, American producers are dying. When OPEC and the Russian group cut production, it raises prices for everyone, and Americans capture more market share.