In early April, before the last OPEC deal was signed, it was U.S. President Donald Trump who suggested that the U.S. cut oil production as a natural response to worsening market conditions. Initially, this statement did not suit OPEC, which needed more obligations from the world‘s largest oil producer and consumer.
“Well, I think this is an automatic reaction. Because they are already reducing … Because it is … the market. This is demand. This is supply and demand. They are already reducing – and quite serious volumes,” said US President Trump at the beginning last month.
Ultimately, OPEC + agreed to reduce production by 9.7 million barrels per day – a volume significantly exceeding the level of OPEC reductions in recent years. The non-OPEC allies who collaborated with her on the agreement pledged to cut another 10 million barrels per day.
Last month, the US Secretary of Energy announced that the Department of Energy had expected US production to drop by 2–3 million barrels per day by the end of the year. The cuts seem to have exceeded ministry expectations.
The need to reduce production became apparent as the United States halted almost all activity amid an outbreak of coronavirus, which threatened to suppress the country’s entire healthcare system. A large part of the economy was stopped and demand was limited, as well as the oil and gas industry, which feeds this economy.
Reductions in US manufacturers may be aimed at alleviating the discontent of OPEC and Russia, who are unhappy that the United States will not demand from its producers to limit production. In the end, US shale oil production only benefited from previous OPEC cuts.
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