Opec, Russia meet to extend record oil supply cuts, push for compliance

An extension to cuts was contingent on high compliance, three Opec sources told Reuters

The Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia met on Saturday to approve extending record oil production cuts and to push countries such as Iraq and Nigeria to comply better with existing curbs, Reuters reported.

The producers known as Opec+ previously agreed to cut supply by a record 9.7 million barrels per day (bpd) during May-June to prop up prices that collapsed due to the coronavirus crisis. Cuts have been due to taper to 7.7 million bpd from July to December.

Opec+ sources said that Saudi Arabia and Russia had agreed to extend record cuts throughout July although Riyadh would prefer to see cut extended throughout August. Global benchmark Brent crude , which slumped below $20 a barrel in April, rose nearly 6 per cent on Friday to trade at a three-month high above $42.

Saturday's video conferences will start with talks between members of the Opec at 1200 GMT, followed by a gathering of the OPEC+ group at 1400 GMT, OPEC said on Friday.

Three Opec sources said an extension to cuts was contingent on high compliance. They said countries that produced above quota in May and June must promise to adhere to targets and compensate for any earlier overproduction by cutting more in July, August and September.

Iraq, which had one of the worst compliance rates in May, according to a Reuters survey, agreed to additional cuts, Opec sources said.  It was not clear how exactly Iraq would cut output and agree with oil majors working in the country to curtail production. Nigeria said it would also aim to reach full compliance.
 

"The Saudis have been pushing Baghdad hard to comply," one Opec+ source said. "Iraq has agreed to the pledge to improve its full compliance with the cuts."

Baghdad blamed technical reasons and a recent change in its government for weak compliance in May, another Opec source said. It was not clear how exactly Iraq would agree with oil majors working on its territory to reduce output further. The country is yet to assign a new oil minister with the finance minister also performing the role of acting oil minister.

Nigeria said in a statement earlier this week it had made "concerted efforts to adhere to [its cut] commitment and will continue to do so unequivocally". The country aims to reach full compliance by the end of the month, the country's oil minister Timipre Sylva said, adding that they measured their compliance in May at 52 per cent.

Mexico, which resisted pressure by other Opec+ members to cut output by 23 per cent or 400,000 bpd, agreed to cut output by 100,000 bpd only for May and June at the April meeting. President Andres Manuel Lopez Obrador said on Friday his country was not in a position to make any additional cuts, but that Energy Minister Rocio Nahle would be taking part in the Opec+ meeting.

The Opec+ technical and ministerial committee meetings, which review the market and usually make recommendations on policy, were now scheduled for June 17 and 18, Opec+ sources said.