The Organization of Petroleum Exporting Countries and its allies (OPEC+) has agreed to extend its current record output cuts by another one month, to further support the oil price recovery. The current output cut, which is to terminate at the end of June, is part of the measures taken by the cartel to help rebalance the oil market.
The agreement to this deal by all member countries, precedes today’s meeting of the alliance, which is currently underway through a video conference. The group has agreed to maintain its current output cut of 9.7 million barrels per day till the end of July as against the 7.7 million barrels per day that was initially planned.
This is a victory for Saudi Arabia and Russia, who have been trying to persuade other members of the alliance to implement these cuts.
The Algerian Oil Minister, who is also the President of OPEC, praised the efforts of Saudi Arabia, United Arab Emirates, Kuwait and Oman for offering voluntary additional cuts for the month of June amounting to a total of 1.2 million barrels per day. He said that by the first half of 2020, oil stocks are expected to increase by an unprecedented 1.5 billion barrels.
Nigeria had, a few hours earlier, reconfirmed its commitment under the existing agreement of 9.7 million barrels per day output cut. It had also committed to making additional oil output cuts from July to September to compensate for producing more than its quota in May and June. This was confirmed in a tweet post from the Federal Ministry of Petroleum Resources on its official twitter handle.
Meanwhile, the news of the agreement had made positive impact on crude oil prices.
The Brent crude went up by more than 5%, selling for $42.30 per barrel on Saturday morning. This is the highest in about 3 months. The American WTI crude went up by more than 5% to close at $39.55 per barrel, while the Nigerian Bonny light crude went up by 2.90% to sell for $41.17 per barrel, the highest in 5 months.
Apart from Nigeria, other traditional laggards on OPEC+ output cuts have promised a couple of times to do better this time around, although some analysts are skeptical about this.