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Yesterday afternoon, OPEC+ eked out an agreement
to increase the output of its 23 members by 500,000 barrels/day come
January.
- What’s OPEC+? Not a
streaming service, a group of oil-producing countries that accounts
for about half of global production.
How we got here
Early March: Pandemic lockdowns crushed demand
for fuel, sending oil prices down nearly a quarter.
April: Oil futures hit negative territory for
the first time, underscoring oversupply in the market.
May: OPEC+ decided to cut output by 9.7
million barrels/day to prop up prices.
August: The group eased cuts to 7.7
million/day.
Now: Negotiations broke down earlier this week
as some OPEC+ nations (including Saudi Arabia) tried extending cuts through
Q1 and others pushed for greater compliance from members.
- The
compromise will keep the oil market in a deficit, helping producers
burn through extra inventory.
Zoom in: Oil prices may feel abstract, but
their 2020 tumble has very real consequences. Yesterday, Chevron shaved up
to $6 billion off its budget. In all, big oil companies have written down
~$80 billion in assets this year, Reuters reports.
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