OPEC to reduce oil production during COIVD pandemic

Calgary (CityNews) – A G20 Meeting has bolstered some optimism as some oil producing countries have finally agreed to cut production.

“If that means signing up for a temporary agreement that can try and cut production, they’ll probably reluctantly do it.” said Moshe Lander, Economics Professor at Concordia University in Montreal.

It follows an all-out price war as the COIVD-19 pandemic drug down the economy, making Canadian oil almost worthless.

This latest move might not be the saving grace the economy needs. “If you push those prices back up above the cost of extraction then every single producer has an incentive to cheat what they’ve agreed to and that’s always the reason OPEC agreements fall apart.”

Alberta’s energy minister Sonya Savage sat through the 9-hour virtual meeting Friday and said in a statement: “We are cautiously pleased to see that OPEC+ has agreed to reduce production by 10 million barrels per day.”

Canada’s energy and resource minister Seamus O’ Regan adding there will be a focus group created that will be tasked with ensuring and reporting on coordinated response measures.

Looking to the bigger picture, analysts say oil and gas stakeholders and the Alberta government need to take a step back and realize, that it’s no longer safe to rely on the industry in the way they are now, and a major re-think is needed.

“They need to start thinking about what their next act is. And the longer it takes them to realize that they need to start thinking that way, the more its going to damage them when that time inevitably comes. From the provincial government’s standpoint, they have to realize that they are excessively reliant on one source for too much of their revenue,” added Lander.

Despite Canada’s economy taking a major beating, Lander says there could be some good in that Alberta’s Premier Jason Kenney and the PM’s relationship is in a sort of recovery. “In the last month or so, he seems to be able to work with the prime minster and a lot of that hostility seems to have seeped away.”

Lander says this solution may take us through the next 6 months or so, but harder discussions need to be had.