OPEC Extend Oil cuts
It looks like Russia and Saudi Arabia have agreed to extend OPEC agreement at the current production level for the rest of the year. The deal might also extend to the early part of 2020.
Speaking at the G20 summit in Japan, Russian President Putin stated the extension of the output cuts might be extended to 6 months also. This coincide with the meeting that has taking place the following week in Vienna. Where OPEC+ will be gathering but also placing Putin as the ultimate position of policy maker within the group.
Saudi oil officials confirmed and welcome their supports to the extension but cautioned discussion with OPEC ministers needs to be happening.
The tension between Moscow and Riyadh seemed to have ended, they are joining forces to manage the global oil market in the effort to move the prices up. The current version of the deal by the so-called OPEC+ coalition calls for production cuts of 1.2 MMbpd.
“We have agreed: we will continue our agreements,” Putin said in Osaka. “In any event we will support the continuation of agreements, both Russia and Saudi Arabia, in the volumes previously agreed.” The announcement marks the first time a senior leader from the group has indicated the curbs could be needed into 2020. That reflects a somber outlook for oil supply and demand next year due to a combination of slowing global economic growth and rising U.S. shale output.
“The Saudi-Russia deal, combined with a positive outcome from the U.S.-China trade talks at the G-20, should allow oil prices to move higher,” said Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd. in London.
A long extension could also be an acknowledgment by Russia of the impact of the massive Druzhba pipeline outage on its production capacity. The country’s oil output has fallen in recent weeks as a result of on-off flows through the link, parts of which were suspended two months ago amid the contaminated-crude crisis.
“The strategic partnership within OPEC+ has led to the stabilization of oil markets” while supporting global economic growth, Kirill Dmitriev, head of the Russian Direct Investment Fund, said on Saturday following the talks.