Historic OPEC+ pact: The planned production cuts come as Oman’s crude benchmark – the Oman Crude Futures Contract (OQD) – plummeted to a new low of $16.82 per barrel in trading on the Dubai Mercantile Exchange (DME) on Tuesday.
MUSCAT: Leading oil producers in the Sultanate are preparing to slash output during May and June 2020 in line with a pledge by the OPEC+ alliance, which includes Oman as a signatory, to cut global production and help shore up record low international oil prices.
It follows a commitment by non-Opec producer Oman to cut 23 per cent of total production (using the October 2018 level as the baseline) as part of an historic pact by Opec and its allies to help bolster oil prices battered by the coronavirus pandemic and a damaging oil price war waged by Saudi Arabia and Russia.
The reduction will see Oman pare around 201,000 barrels per day (bpd) of its October 2018 baseline output of 883,000 bpd in line with the groundbreaking pact. This will be shared on a pro rata basis by all of Oman’s top producers.
Majority state-owned Petroleum Development Oman (PDO), the biggest of the country’s oil and gas producers, will cut production to 453,000 bpd, down from 588,000 bpd (per the October 2018 baseline) from oilfields across its Block 6 license. Occidental Petroleum is limiting output to 88,000 bpd from its Mukhaizna (Block 53), 62,000 bpd from Block 9 and 6,000 bpd from Block 27.
Daleel Petroleum’s output from Block 5 will be restricted to 39,000 bpd, down from 51,000 bpd in October 2018. CC Energy Development (CCED), operators of Blocks 3&4, will ease production to 30,000 bpd (down from 38,000 bpd).
Three other producers – Oman Oil Company Exploration & Production (OOCEP) – part of OQ, Musandam Oil & Gas Company (MOGC), and Hydrocarbon Finders (HCF) — are expected to pitch in with modest cutbacks as well.
Oman’s share of the OPEC+ production cuts will decline to 161,000 bpd for the rest of 2020, before falling to 121,000 bpd for the remainder of the agreed timeframe of the pact, which runs till April 2022.
As part of the landmark pact, Opec’s 13 members joined forces with 10 non-member producers including Russia, to cut output by 9.7 million bpd during May – June 2020. The cuts will be further eased to 7.7 million bpd between July and December 2020, and then to 5.8 million bpd between January 2021 and April 2022.
The planned production cuts come as Oman’s crude benchmark – the Oman Crude Futures Contract (OQD) – plummeted to a new low of $16.82 per barrel in trading on the Dubai Mercantile Exchange (DME) on Tuesday. It fell $2.63 per barrel overnight, mirroring losses suffered by global oil benchmarks as prices plunged for a second successive day as traders fretted over rapidly declining storage capacity and concerns that growth in oil demand will not happen quickly enough.