According to a senior US government official, US tariffs on oil imports were not lifted even after the latest OPEC + deal.
Earlier, before the OPEC agreement, US President Donald Trump threatened Saudi Arabia and Russia with tariffs if an agreement was not reached. This suggests that US might have wanted the cuts to be implemented.
According to Francis Fannon, US Assistant Secretary of State for Energy, the global oversupply of oil will take some time to reduce, even after the recent decision of major world producers to reduce oil production. He said this just a few days after the finalization of the OPEC+ deal, where members agreed to cut production by almost 10% in order to revive the market.
However, taking into account the fact that the International Energy Agency revised its estimates of global demand this Wednesday, the reduction agreement is actually too late. Oil already collapsed before demand statistics were summed up. Moreover, the predictions before were based on the situation before quarantine was implemented.
In US, companies are already cutting costs and blocking idling, which Trump calls "automatic" cutbacks in response to a market slowdown, rather than mandatory cutbacks.
"The entire shale revolution is based on the private sector and meets the market," Fannon said. "I am completely confident that the private sector will respond in the opposite direction."
OPEC expects demand for crude oil to fall to its lowest level in three decades, as the outbreak of the coronavirus freezes the global economy, highlighting the urgency of its promised production cuts.
According to the group's monthly report, on average, OPEC countries will produce less than 20 million barrels per day in the second quarter. However, even if these countries implement their share of agreed reductions, they will still produce more than what the market demands in the second quarter. Thus, with perfect compliance, the 13 countries will produce about 23.4 million barrels per day, which is about 3.7 million more than the agreement with OPEC.
Indeed, reality is much more complicated than prediction.
Although the group has already lowered its forecasts for global oil demand this year, the estimates are still more optimistic than that of the International Energy Agency.
Meanwhile, the US cash market recovered slightly, as Saudi Arabia raised the official selling prices of its oil to buyers in the US. The first to react were differentials for raw materials with a high sulfur content, such as Mars Blend.
