OPEC and Russia Extend Agreement to Reduce Oil Production until Late July

Thanks to the agreements reached in April, the price of oil doubled in two months OPEC, Russia and a number of major oil producers agreed on Saturday to extend the agreement on a record reduction in oil production until the end of July, extending the agreement, which helped double oil prices over the past two months and remove almost 10% of all global oil supplies from the market. The group, also known as OPEC+, also demanded that countries such as Nigeria and Iraq, which exceeded oil quotas in May and June, offset further reductions in July-September. In April, OPEC+ members agreed to reduce supplies by 9.7 million barrels per day during May-June to support prices collapsed due to the coronavirus pandemic. The reduction in July-December was to amount to 7.7 million barrels per day. “Demand is returning as large oil-consuming countries exit the lockdown. But the danger still remains, and problems may lie ahead,” said Prince Abdulaziz bin Salman, head of the Saudi Ministry of Energy, during a videoconference of OPEC+ energy ministers. Brent crude prices rose on Friday to a three-month high - above $ 42 per barrel. In April, Brent dropped below $ 20. Prices are still a third lower than at the end of 2019. "We can expect that price dynamics will increase from Monday, maintaining the level of $ 40 and above," says Rystad Energy analyst Björnar Tonhaugen. Saudi Arabia, OPEC de-facto leader, and Russia can balance oil prices to meet their budgetary needs without raising them above $50 per barrel so as not to stimulate a resurgence in American shale oil production. Tonhaugen believes that Saturday’s decisions will help OPEC reduce its reserves from 3 to 4 million barrels per day for July-August. "The faster stocks are reduced, the higher prices will be. And this is very important for many OPEC+ countries, whose budget is calculated based on oil sales," the analyst says. The OPEC+ Joint Ministerial Monitoring Committee, known as JMMC, will now meet every month until December to review the market situation and recommend levels of production decline. The next JMMC meeting is scheduled for June 18, and the next OPEC-OPEC+ meeting will be held from November 30 to December 1.