Russian President Vladimir Putin yesterday said he agreed with Saudi Crown Prince Mohammed Bin Salman to extend an OPEC+ deal at current production levels for the rest of this year and potentially into early next year.
The comments, made at the G20 summit in Osaka, Japan, all but make the outcome of the OPEC meeting tomorrow and on Tuesday in Vienna a foregone conclusion, and further reinforce Putin’s role as the ultimate policymaker within the group.
Saudi Arabia and Russia in 2016 ended years of animosity to join forces to manage the global oil market in an effort to prop up prices. The current version of the deal by the group known as OPEC+ calls for production cuts of 1.2 million barrels a day, which were due to expire at the end of this month.
“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,” he told reporters.
Putin said the extension could last six to nine months, marking the first time a senior leader from the group has indicated the curbs could be needed into next year.
That reflects a somber outlook for oil supply and demand next year due to a combination of a slowing global economy and rising US shale output.
On Friday, West Texas Intermediate for August delivery fell US$0.96 to US$58.47 a barrel at the close of New York Mercantile Exchange trading, up 1.8 percent for the week.
Brent for September settlement on Friday lost US$0.93 to US$64.74 on London’s ICE Futures Europe Exchange, up 0.4 percent for the week.
The August contract, which expired on Friday, was unchanged.
For Moscow, extending the curbs by nine months has an extra incentive, as Russian companies struggle to raise production over the winter months. By extending the deal into next year, Russia could be in a better position to pump more during the spring of next year.
The deal removed 1.2 million barrels a day of OPEC+ production, helping to send oil prices higher.
However, the group has reduced output by far more than it agreed, due to the effects of US sanctions on Iranian and Venezuelan output.
What is more, Saudi Arabia unilaterally lowered production below its official OPEC+ target, pumping 9.7 million barrels a day last month, compared with a ceiling of 10.3 million.
The verbal agreement between Putin and Prince Salman at the G20 further highlights the importance of the gathering as a key policymaking forum for oil and OPEC watchers.
Last year, Putin and Prince Mohammed used the summit in Buenos Aires to give their political backing to extend the OPEC+ deal into the first half of this year.
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