Corona Virus: OPEC to cut oil production largely since 2008 financial crisis
On March 5, 2020, the world’s largest oil production nations of OPEC (Organization of Petroleum Exporting Countries) have planned to cut production. This is the deepest oil production cuts since 2008 financial crisis.
The major member of OPEC, Saudi Arabia has planned to cut production by 1.5 million barrel a day from April 2020. This is equivalent to holding back 3.6% of global oil supplies. The cuts are being made to avoid oil prices from collapsing.
OPEC has taken this decision predicting decline in demand of oil due to Corona Virus and its impact all over the world. When the demand decreases and supply is maintained at the same level, prices will reduce as the availability of oil will increase. Therefore, OPEC is cutting the supply.
Russia has been hesitant towards making deeper cuts. Being a major contributor of OPEC, Russia’s move might backfire other OPEC countries. This is because, the oil exports of Russia will tend to increase as Russia oil will become cheaper. Therefore, other countries of OPEC are forcing Russia to join deeper oil production cuts