In major move that could lift oil prices, members of the Organization of the Petroleum Exporting Countries (OPEC) and allied oil producers led by Russia have decided to extend massive output curbs beyond the initially agreed two months.
The 13 members of the oil alliance and 10 non-OPEC states held an online meeting on Saturday to decide the fate of the cuts, currently at 9.7 million barrels per day (bpd). Delegates said all sides have agreed to extend the cuts for another month until the end of July, according to Bloomberg. The conference was still underway as the report emerged.
According to the initial plan hammered out in April, the record curbs were set to stay in place in May and June before dropping to 7.7 bpd from July.
Not all members of the oil group were eager to support extended curbs. Nigeria’s minister of state for petroleum resources signaled ahead of the meeting that one or two nations, which he did not directly name, were against the measure. Meanwhile, Riyadh had reportedly been pushing for even longer curbs, considering an extension to August or even December.
While oil prices have already rebounded from April lows, when WTI entered negative territory for the first time ever and Brent slumped below $20 a barrel, the market is still under tremendous pressure due to the coronavirus. At the same time, some of the signatories of the deal – including the OPEC’s second largest producer, Iraq – failed to meet their obligations in May, keeping production above their quota.
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On Friday, when OPEC confirmed that the meeting was brought forward, both global oil benchmarks surged over five percent. The rally marked a sixth consecutive weekly gain for WTI and Brent, which ended the week at $39.55 per barrel and $42.30 per barrel respectively. That is still around a third less than the price of oil at the end of 2019, before the oil market started to collapse.