OPEC and its allies led by Russia agreed to extend oil output cuts until March 2020 on Tuesday, seeking to prop up the price of crude as the global economy weakens and U.S. production soars.
The alliance, known as OPEC+, has been reducing oil supply since 2017 to prevent prices from sliding amid increasing competition from the United States, which has overtaken Russia and Saudi Arabia to become the world’s top producer.
Asked by reporters whether agreement had been reached, Saudi Energy Minister Khalid al-Falih said: “Yes.”
Benchmark Brent crude has climbed more than 25% so far this year after Washington tightened sanctions on OPEC members Venezuela and Iran, causing their oil exports to drop.
The approval of the pact extension on Tuesday follows a decision by OPEC producers the previous day.
Fears about weaker global demand as a result of a U.S.-China trade spat have added to the challenges faced by the 14-nation Organization of the Petroleum Exporting Countries.
Prolonging the output pact is likely to anger U.S. President Donald Trump, who has demanded OPEC leader Saudi Arabia supply more oil and help reduce fuel prices if Riyadh wants U.S. military support in its standoff with arch-rival Iran.
A jump in oil prices might lead to costlier gasoline, a key issue for Trump as he seeks re-election next year.
Brent was trading slightly weaker at just below $65 per barrel. [O/R]
The OPEC+ extension comes after Russian President Vladimir Putin said on Saturday he had agreed with Saudi Arabia to prolong the pact and continue to cut combined production by 1.2 million barrels per day, or 1.2% of world demand.
Oil prices could stall as a slowing global economy squeezes demand and U.S. oil floods the market, a Reuters poll of analysts found.
Saudi Arabia’s Falih said on Monday he was growing more positive about the global economy after a G20 meeting of world leaders over the weekend.
“The global economy in the second half of the year looks a lot better today than it did a week ago because of the agreement reached between President Trump and President Xi (Jinping) of China and the truce they have reached in their trade and the resumption of serious trade negotiations,” Falih said.
The meeting on Tuesday also agreed on a charter for long-term cooperation between OPEC and non-OPEC producers.