OPEC prepares to extend oil production cuts to keep oil prices higher

Posted at 6:21 AM, Jul 01, 2019
and last updated 2019-07-01 08:26:43-04

OPEC and its allies look ready to restrict the supply of oil at least until the end of 2019 as they try to support prices in the face of softer global demand and surging US output.

Saudi Arabia, the biggest producer within OPEC, and Russia, the cartel’s most powerful ally, met over the weekend to discuss extending supply curbs that were first introduced in 2017 after global oil prices crashed. The latest round of cuts were due to expire Sunday.

Saudi oil minister Khalid Al-Falih met with his Russian counterpart Alexander Novak on the sidelines of a summit of G20 leaders in Osaka, Japan.

“During the meeting, they discussed the options for extending the OPEC + deal, as well as the cooperation in the oil and gas sector between the Kingdom of Saudi Arabia and Russia,” the Saudi Press Agency reported.

OPEC’s 14 member countries are meeting in Vienna on Monday to agree a common position. They’ll be joined by Russia and other partners on Tuesday.

Oil prices gained 2.4% on Monday in anticipation of an agreement to continue withholding supply. News of a truce in the trade war between the United States and China was also providing support.

A proposal to rollover production cuts looks likely to win the support of Iran, Saudi Arabia’s regional rival, despite rising tensions between the two countries over the war in Yemen and attacks on oil tankers in the Strait of Hormuz.

“We have no issue with a six, seven or eight-month extension,” a senior Iranian source told CNN Business.

It won’t please President Donald Trump, however, who has repeatedly called for OPEC to pump more oil to keep US gas prices in check.

US sanctions on Iran helped drive prices sharply higher in the first four months of this year. Iran’s oil exports have slumped since the expiry in May of waivers allowing some of its biggest customers, such as India, to continue buying without fear of US legal action.

The United States has overtaken Saudi Arabia and Russia to become the world’s biggest oil producer, thanks in large part to a boom in the Permian Basin in West Texas. Its imports from OPEC plunged to their lowest level in three decades earlier this year.