Oil market responding well to record production cuts, says OPEC chief

Improving oil prices following record production cuts from the world’s major producers is an encouraging sign for the market’s recovery, according to OPEC’s secretary general Mohammad Barkindo.

The group known as OPEC+ agreed to cut supply by 9.7 million barrels per day (bpd) from May 1 to jumpstart the sector back to life after COVID-19 induced lockdowns around the world decimated demand.

Oil prices collapsed by as much as 60% at the height of the pandemic compared to the start of the year, but have more than doubled in recent weeks since hitting a 21-year low below US$16 per barrel in April.

“The oil markets have responded positively to the historic agreement, as well as its robust implementation by participating countries,” Barkindo told Reuters. OPEC+ has cut oil exports by about 6 million bpd, according to two companies that track the flows.

OPEC+, which is comprised of OPEC members and non-members including Russia, will meet virtually on June 10 – when it will have a full month’s data on compliance – to review the agreement.

Sources have said that the oil cartel may keep the current level of supply reduction after June, rather than scaling it back from July as currently agreed.

“There are good indications on compliance, and we have seen prices improving lately,” said another OPEC delegate. “But the market is still volatile, let’s wait.”