Saudi Arabia agrees with Putin to extend OPEC oil deal
Saudi Arabia has agreed to extend the current OPEC oil production reduction deal, by six to nine months.
Russian President Vladimir Putin announced the deal after meeting with Saudi Arabia’s Crown Prince Mohammed bin Salman at the G-20 Summit in Osaka, Japan, saying the pact would be extended in its current form and with the same volumes.
The extension comes as increasing U.S. inventories and worries about weak global demand add pressure on oil prices.
The Organization of the Petroleum Exporting Countries, Russia and other producers, an alliance known as OPEC+, meet on July 1-2 to discuss the deal, which involves curbing oil output by 1.2 million barrels per day (bpd).
“We will support the extension, both Russia and Saudi Arabia. As far as the length of the extension is concerned, we have yet to decide whether it will be six or nine months. Maybe it will be nine months,” Reuters quoted Putin.
Saudi Energy Minister Khalid al-Falih said earlier last week that the deal would most likely be extended by nine months and no deeper reductions were needed.
“Demand is softening a little bit but I think it’s still healthy,” the Saudi minister said, adding that he expected the market to balance in the next six to nine months.
Falih said the new deal would help reduce global oil stocks, balance the market and spur investments in future energy supplies.
“The agreement confirms that the Saudi-Russian partnership paved the way to guarantee the interest of producers and consumers and the continued growth of the global economy,” Falih tweeted.
Russia’s Energy Minister Alexander Novak said he believed most OPEC members including Iran have already expressed support to extend the output-cutting deal.
He said it may be wise to extend the agreement by nine rather than six months to avoid raising output during weak seasonal demand.
“It might make sense to keep the deal in place during the winter period,” he told reporters, according to Reuters.
Ann-Louise Hittle, vice president, Macro Oils, at Wood Mackenzie says the outlook for the market is mixed as OPEC and Russia meet in Vienna this week.
“Geopolitical risk means the supply outlook is tightening, offsetting the moderate weakening in oil demand growth thus far this year,” she said.
“We expect demand to increase 1 million barrels per day (b/d) in 2019, with a pick-up in the second half of the year after the weak growth in the first half. However, this is at risk if the US increases tariffs on its imports from China or other nations and global GDP weakens further.”
She added: “We expect OPEC+ will continue production restraint through the second half of 2019, rolling over the current agreement.”
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