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Global Oil Output Cuts To Continue For 6 Months, Say Russia And Saudi Arabia

Global Oil Output Cuts To Continue For 6 Months, Say Russia And Saudi Arabia
The OPEC oil production cuts deal has been decided to be extended by another six to nine months by Russia and Saudi Arabia, announced the Russian President Vladimir Putin at the G-20 leaders summit in Japan.
The deal which is set to expire on June 30 would be discussed in a meeting on July 1-2 by the OPEC+ group which includes the Organization of the Petroleum Exporting Countries, Russia and some of the other oil producers.
The first attempt to manage global oil output to support prices was made in 2016 by Saudi Arabia and Russia jointly. That came to be known as the OPEC+ coalition and currently the arrangement aims to cut production by 1.2 million barrels a day.
“We will support the extension, both Russia and Saudi Arabia,” Putin said at a news conference in Osaka, Reuters reported. “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,” said Putin said. He also had a meeting with the crown prince on the sidelines of the G-20 summit in Osaka, Japan.
“In any event we will support the continuation of agreements, both Russia and Saudi Arabia, in the volumes previously agreed.”
This declaration also indicates for the first time when a leading member of the OPEC+ group believes that the production cuts can be required again in 2020. It also shows that the outlook for the global oil market demand is gloomy even next year because of a host of issues including the slowdown in global economic growth and enhancement in production of US shale oil.
The Russian budget revenues have already been lifted by more than 7 trillion rubles USDRUB, ($110 billion) because of the production cuts which have been in place since 2017, said Kirill Dmitriev, the chief executive of Russian Direct Investment Fund who was instrumental in forging the OPEC-Russia deal. “The strategic partnership within OPEC+ has led to the stabilization of oil markets” while supporting global economic growth,” he said on Saturday following the talks.
The benchmark Brent crude has oscillated between $45 and $85 a barrel since Russia and Saudi Arabia started to jointly manage the oil production market in late 2016.
Because of the US sanctions on Iran and Venezuela, there was a reduction in output from both countries which prompted a production cut by more than the pledged 1.2 million barrels a day this year by the OPEC+ alliance. Saudi Arabia on its own has also reduced its production further and its output in May was 9.7 million barrels a day compared to its OPEC+ ceiling of 10.3 million.

Christopher J. Mitchell

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