OPEC and non-OPEC members have agreed to extend the decision on voluntary production cuts for another nine months.
The 6th meeting in Vienna, Austria decided to extend the decision on the production adjustments from July 1 to March 3, 2020.
The meeting took the decision in view of the underlying large uncertainties and its potential implications on the global oil market. The Joint Ministerial Monitoring Committee was requested to vigilantly monitor the fair implementation of the resolution in light of the supply and demand balance and the prevailing uncertainties and report back to the meeting.
The meeting did note that there has been overall improvement in market conditions and sentiment and that confidence and investment has returned to the oil industry.
Additionally, a draft Charter of Cooperation was endorsed during the meeting, which is a high-level voluntary commitment, to enable the continued proactive dialogue between countries in the Declaration of Cooperation at both ministerial and technical levels.
Ann-Louise Hittle, vice president, macro oils, at global natural resources consultancy at Wood Mackenzie, says that the agreement was a ‘foregone conclusion’ after the green light from Russia’s president at the G20 meeting for continued production restraint.
She says: ‘Vladimir 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 organised. OPEC made its announcement on July 1, with the broader OPEC+ group confirming continued production restrain today. Output curbs will remain in place through 2019 and into the first quarter of 2020, under the current terms.
‘The impact on oil prices has been limited, with prices rising slightly on July 1. They dipped on July 2, 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.’