OPEC, Russia and allies agreed to extend record oil production cuts until the end of July, prolonging a deal that has helped crude prices double in the past two months by withdrawing almost 10 percent of global supplies from the market.
The group, known as OPEC+, also demanded countries such as Nigeria and Iraq, which exceeded production quotas in May and June, compensate with extra cuts from July to September.
OPEC+ had initially agreed in April that it would cut supply by 9.7 million barrels per day during May-June to prop up prices that collapsed due to the coronavirus crisis. Those cuts were due to taper to 7.7 million barrels per day from July to December.
“Demand is returning as big oil-consuming economies emerge from pandemic lockdown. But we are not out of the woods yet and challenges ahead remain,” Saudi Energy Minister Prince Abdulaziz bin Salman told the video conference of OPEC+ ministers.
OPEC+’s joint ministerial monitoring committee, known as the JMMC, will meet monthly until December to review the market, compliance and recommend levels of cuts. JMMC’s next meeting is scheduled for June 18.
Saudi Arabia, OPEC’s de facto leader, and Russia have to perform a balancing act of pushing up oil prices to meet their budget needs while not driving them much above $50 a barrel to avoid encouraging a resurgence of rival US shale production.
