News ID: 269863
Published: 0213 GMT June 07, 2020

OPEC, allies agree to extend deep output cuts through July

OPEC, allies agree to extend deep output cuts through July

Iran hails OPEC+ ‘right decision’ to decrease production

OPEC members and other key oil producers agreed Saturday to extend historic output cuts through July, as oil prices tentatively recover and coronavirus lockdowns ease.

The 13-member group and its allies, notably Russia, decided to extend by a month deep May and June cuts agreed in April to boost prices, the Organization of the Petroleum Exporting Countries said in a statement, AFP reported.

But Mexico, which had already made clear ahead of the talks that it "could not adjust... production further", announced that it would not be complying.

Oil prices have plummeted as a result of falling demand as countries around the world impose strict lockdowns to stop the spread of the new coronavirus.

"All participating countries... agreed the option of extending the first phase of the production adjustments pertaining in May and June by one further month," the OPEC statement said.

Under the terms of the April agreement, OPEC and the so-called OPEC+ pledged to cut output by 9.7 million barrels per day (bpd) from May 1 until the end of June.

The cuts were then to be gradually eased from July, to 7.7 million bpd until December.

Algerian Oil Minister Mohamed Arkab, who currently holds OPEC's rotating presidency, said that the agreed cut for July was 9.6 mbd, just slightly below the 9.7 mbd for May and June.

Oil ministers from key producers will meet monthly to assess the agreement, he added.


‘Right’ decision

Iran’s Oil Minister Bijan Namdar Zanganeh hailed the extension of cuts, saying oil price jump shows the decision by OPEC+ to slash output was a “right” one.

Analysts had expected the May-June cuts to be extended by at least another month, if not longer.

A bone of contention ahead of the meeting had been the willingness of each country to abide by the agreed production quotas.

According to data intelligence company Kpler, OPEC+ reduced output by around 8.6 mbd in May, less than planned, with Iraq and Nigeria seen as the most resistant.

OPEC said all meeting participants agreed that countries that failed to comply fully so far were willing to make up for it in July, August and September.

Nevertheless, it was precisely that earlier failure that led Mexico on Saturday to refuse to extend its cuts.

"There are other countries that extended the cuts to July. We told them no, that we are maintaining the agreement signed in April. There is no problem," Mexico's Energy Minister Rocio Nahle told reporters.

She said Mexico "fully respected" the original agreement, under which it agreed to cut production by 100,000 barrels a day in May and June, but other countries "did not respect it," without specifying which ones.

Despite the difficulties, the output cuts have helped support oil prices, which rose to around $40 per barrel at the start of June for both the US benchmark, West Texas Intermediate (WTI), and Europe's Brent North Sea contracts.

Both had slumped to historic lows in April, with Brent falling as low as $15 and WTI briefly entering negative territory.

The April deal was signed after days of wrangling between major players, whose revenues have been ravaged by the collapsing oil market this year.

The next meeting of OPEC and its allies has been scheduled for December 1 in Vienna, where the organization is based.





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