An agreement has been reached to cut oil supply and end price war.
In the midst of the coronavirus pandemic, travel bans on air travel as well as strict stay-at-home orders have resulted in reduced travel across much of the world. It's no longer viable to go for a drive in your Porsche 911 Turbo just because you feel like it and, as a result, the lack of demand for various types of fuels has seen global oil prices plummet to their lowest levels in nearly two decades. There's good and bad news as a result, with the good news being that gas prices are now the lowest they've been in years in many places around the world, but the bad news is that as demand falls and the market is overcome with supply, income drops substantially and the risks of job loss increase exponentially.
But there's hope the devastating effects of the virus will be curtailed as the OPEC+ group of oil-producing countries have finally reached a deal to cut production by as much as 10%, starting in May.
The deal has been in the cards for nearly a week now, but the previous figures tabled were rejected by Mexico, which was struggling to support its own production company even before the pandemic struck. However, the USA stepped in and agreed to take additional cuts Mexico was unwilling to in an unprecedented show of support between the two nations. The resultant deal means that between OPEC nations and their allies, 9.7 million barrels of oil per day will be cut, reducing supply by nearly 10%.
The restrictions will begin as of May 2020 and will initially remain in place until the end of June. Thereafter, the cuts would be eased back to 8 million barrels per day until December, and once more to 6 million barrels a day from January 2021 to April 2022.
Once news of the deal broke, Brent Crude prices immediately recovered to more than the $30 per barrel mark under which they'd been for several days. However, they are once again expected to drop as production continues as normal until May 1 when the deal officially starts. That means gas prices could drop even further until then, highlighting the tragic irony that now, when it's easier than ever to buy a supercar and gas prices are at their lowest, we're unable to go out and drive.