Global Price War Ending Pact Forces Oil Majors To Production Cuts!

The world’s largest energy companies are negotiating production cuts with oil-rich nations ahead of Friday’s deadline for OPEC and the Group of 20 countries to sharply reduce output—reductions that will limit these firms’ options for coping with the crude-price rout, reports the Wall Street Journal.

What is it?

Earlier in April, Saudi Arabia and Russia ended a price war and joined forces with the Organization of the Petroleum Exporting Countries and other oil-producing nations, agreeing to cut global output by 13% or about 13 million barrels a day. Big oil companies like Chevron, Royal Dutch Shell etc. are negotiating for oil production cuts, says a Seeking Alpha report.

Oil Companies Shouldering Price War Cut

Major oil producing companies including BP, Chevron (NYSE:CVX), Occidental Petroleum (NYSE:OXY) and Royal Dutch Shell (RDS.A, RDS.B) are negotiating production cuts with oil-rich countries ahead of tomorrow’s deadline for OPEC+ to sharply reduce output – reductions that will limit options for these companies to cope with sharply lower crude prices, WSJ reports.

Saudi Arabia and Russia ended their price war earlier this month and joined with OPEC+ in agreeing to cut global output by ~13 M bbl/day, and big oil companies that produce in those countries are being told to shoulder some of those cuts.

Nigeria’s government says it has reached out to Chevron and Shell, Oman has ordered Occidental to cut production at its fields by a combined 58K bbl/day, and BP has been asked to reduce output in locations including the Middle East, Angola and Azerbaijan.

Chevron’s Outlook

Chevron says its 50%-owned venture in Kazakhstan “continues to produce according to the business plan,” and the company says it was working with its Nigerian partners to “explore ways of reducing costs and adjusting production.”

Roughly half of the barrels BP pumps annually come from Africa and Asia, where most major producing countries have joined the OPEC+ alliance; Eni (NYSE:E) and Total (NYSE:TOT) derive a respective 75% and 68% of their oil production from the two continents.