Following OPEC’s decision on Monday to extend the voluntary oil production cuts in order to keep oil prices stable, the Russia-led block of non-OPEC nations has agreed to the same on Tuesday.
At the sixth OPEC and non-OPEC Ministerial Meeting held in Vienna, Austria, on Tuesday, the participants, jointly called OPEC+, “decided to extend the decision taken on voluntary production adjustments at the 5th OPEC and non-OPEC Ministerial Meeting on 07 December 2018, for an additional period of nine months from 01 July 2019 to 31 March 2020,” in view of “the underlying large uncertainties and its potential implications on the global oil market.”
Russian energy minister Alexander Novak said: “In total, 24 ministers from different countries took part. Everyone supported the decision to prolong our agreements, we agreed that we will monitor the situation on the market.”
Novak said that while the market was “quite stable” the extension was needed as there were many uncertainties that may affect the oil market such as trade wars and sanctions on oil-producing countries.
Nevertheless, there were a number of reasons for the extension of the Agreement, Alexander Novak stressed.
In a joint statement on Tuesday the OPEC+ group said an agreement was reached on the draft of the Charter of Cooperation: “The Meeting emphasized the support and commitment of all participating countries in the Declaration of Cooperation to build on the success achieved thus far, and thus endorsed the draft text of the Charter of Cooperation, a high-level voluntary commitment, to enable the continued proactive dialogue between countries in the Declaration of Cooperation at both ministerial and technical levels. The Meeting requests all participating countries to take the draft text through their respective national process,” the joint statement read.
The signing of the charter on long-term cooperation by all parties to the Agreement was another important decision, Russia’s Novak said.
“This is a historical document that will allow us in the long term to interact and not only monitor the market, but also make decisions about balancing it,” he said.
Despite the agreed extension of the oil production cuts, Reuters on Tuesday reported a drop in the oil price of around 3 percent, with Brent dropping to $63.39 a barrel. Reuters cited investors’ fear that a slowing global economy could hurt oil demand.
WoodMac: Deal predictable following Putin comments
Speaking as the OPEC and OPEC+ meetings ended in Vienna today, Ann-Louise Hittle, vice president, Macro Oils, at global natural resources consultancy Wood Mackenzie, said: “The agreement to roll over production restraint was a foregone conclusion after the green light from Russia’s president, Vladimir Putin, at the G20 meeting for continued production restraint.
“Putin met with Saudi Arabia’s Crown Prince Mohammed bin Salman at the G20 and announced Russia will continue to cooperate with Saudi Arabia and OPEC to manage the market.
“The agreement was carefully organized. OPEC made its announcement on 1 July, with the broader OPEC+ group confirming continued production restraint today. Output curbs will remain in place through 2019 and into the first quarter of 2020, under the current terms.
“In addition, a non-restricting charter was issued declaring continued cooperation between OPEC and any willing non-OPEC producers to manage the market in the best interest of producers, consumers and investors.”
Hittle added: “The impact on oil prices has been limited, with prices rising slightly on 1 July. They dipped today, but rose again on rumours of a potential US attack on Iran. As the US stand-off with Iran continues, so will speculation. This will have a varying effect on oil prices, depending on how tightly balanced the market is at the time.
“Wood Mackenzie expects continued production restraint at current levels through 2020 to offset the impact of strong non-OPEC supply growth. For 2019, this results in a tight balance between supply and demand in the remainder of 2019 because of the impact of US oil sanctions on Iran and Venezuela.
“We forecast Brent to average $68 per barrel for 2019 as a whole, and $69.50/b in the second half of 2019.”
Hittle said: “The agreement will help balance the market as 2020 starts. This will allow OPEC+ to decide whether to continue production restraint for the rest of the year, or to adjust quotas. The next ordinary meeting on 5 December 2019 allows the group a chance to reassess 2020 fundamentals.”
Offshore Energy Today Staff
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