OPEC has agreed to extend oil supply cuts until March 2020, three OPEC sources say, as the group’s members overcame their differences in order to prop up the price of crude amid a weakening global economy and soaring US production.
The move will likely anger US President Donald Trump, who has demanded OPEC leader Saudi Arabia supply more oil and help reduce prices at the pump if Riyadh wants US military support in its stand-off with arch-rival Iran.
Benchmark Brent crude has climbed more than 25 per cent so far this year after the White House tightened sanctions on OPEC members Venezuela and Iran, slashing their oil exports.
OPEC and its allies led by Russia have been reducing oil output since 2017 to prevent prices from sliding amid soaring production from the US, which has overtaken Russia and Saudi Arabia as the world’s top producer.
Fears about weaker global demand as a result of a US-China trade spat have added to the challenges faced by the 14-nation Organisation of the Petroleum Exporting Countries.
Gary Ross from Black Gold Investors said Saudi Arabia was doing its best to achieve oil prices at $US70 per barrel despite Trump’s wishes.
“But they haven’t accomplished that even with Iranian and Venezuelan oil exports dropping,” he said.
“And the reasons for that are weak demand and US shale growth.”
The US, also the world’s largest oil consumer, is not a member of OPEC, nor is it participating in the supply pact.
A jump in oil prices might lead to costlier petrol, a key issue for Trump as he seeks re-election next year.
Brent initially rose as much as $US2 on Monday towards $US67 per barrel as traders cited OPEC’s resolve to curb output. It later edged down to trade below $US65.
The OPEC meeting on Monday will be followed by talks with Russia and other allies, a grouping known as OPEC+, on Tuesday.
Russian President Vladimir Putin said on Saturday he had agreed with Saudi Arabia to extend existing output cuts of 1.2 million barrels per day, or 1.2 per cent of global demand, until December 2019 or March 2020.
Oil prices could stall as a slowing global economy squeezes demand and US oil floods the market, a Reuters poll of analysts found.
Saudi Energy Minister Khalid al-Falih said nine months “gives us enough runway to wait for the market to balance”.
He said Saudi Arabia would continue reducing supplies to customers in July.