OPEC members led by Saudi Arabia and other key oil producers agreed Saturday to extend historic output cuts through July.
The 13-member cartel and its allies, among them Russia, decided to extend by a month deep cuts, first agreed in April for May and June, to boost prices hit hard by the new coronavirus pandemic, an OPEC statement said.
“All participating countries… agreed the option of extending the first phase of the production adjustments pertaining in May and June by one further month,” it said.
Prices have plummeted over falling demand as countries around the world have imposed strict lockdowns to stop the spread of the new coronavirus.
Under the terms of the April agreement, OPEC and the so-called OPEC+ countries pledged to cut output by 9.7 million barrels per day (bpd) from May 1 until the end of June.
The cuts were then to be gradually eased from July, to 7.7 million bpd until December.
But Saturday’s meeting agreed to extend the May and June output cuts.
The meeting, originally scheduled for next week, was brought forward at the suggestion of Algerian Oil Minister Mohamed Arkab, who currently holds the rotating presidency of the Organization of Petroleum Exporting Countries.
The April deal was signed after days of wrangling between major players, whose revenues have been ravaged by the collapsing oil market this year.
Some market observers were expecting the cuts to be extended still further, possibly until the end of the summer or even until the end of the year.
Although more countries around the world are gradually moving out of lockdown, crude consumption has not returned to pre-confinement levels, which had already been comparatively low.
As in previous negotiations, discussions could have been particularly tense between Russia and Saudi Arabia, the deal’s two heavyweights who became involved in a short but bitter price war when previous talks broke down in March.
According to data intelligence company Kpler, OPEC+ reduced output by around 8.6 million bpd in May, a smaller cut than planned, with Iraq and Nigeria seen as the main culprits.
Despite the difficulties, the output cut has indeed helped support oil prices, which rose to around $40 per barrel at the start of June for both the US benchmark, West Texas Intermediate (WTI), and Europe’s Brent North Sea contracts.
Around April 20, both had slumped to historic lows, with Brent falling as low as $15 and WTI even enterting negative territory.