OPEC+ and Russia agree to extend oil production cuts - June

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From Bloomberg Updated on June 6, 2020, 1:35 PM CDT

OPEC+ agreed to a one-month extension of its record output cuts and adopted a stricter approach to ensuring members don’t break their production pledges. The deal will underpin the oil market recovery, easing the financial pain felt by resource-dependent emerging economies, shale explorers in Texas, and blue-chip companies like Royal Dutch Shell Plc.

It’s a victory for Saudi Arabia and Russia, who put a destructive price war behind them to successfully cajole Iraq, Nigeria and other laggards to fulfill their promises to cut production. The two leaders of OPEC+ showed that they intend to keep a close watch on the oil market, meeting every month to assess the balance between supply and demand amid an uncertain economic recovery from the global pandemic.

“Our collective efforts have borne fruit, and despite many uncertainties, there are encouraging signs that we are over the worst,” said Saudi Energy Minister Prince Abdulaziz bin Salman. “Demand is returning as big oil-consuming economies emerge from pandemic lockdown,” he added.

After a video conference lasting several hours on Saturday, delegates said all nations had signed off on a new deal for a production cut of 9.6 million barrels a day next month. That’s 100,000 barrels a day lower than the reduction in June because Mexico will end its supply constraints, but a tighter limit than the 7.7 million barrels a day set for July in the group’s previous agreement.

In addition, the communique states that any member that doesn’t implement 100% of its production cuts in May and June will make extra reductions from July to September to compensate for their failings.

Read more here: https://www.bloomberg.com/news/articles ... er-penance

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Trading Economics: US WTI crude rose more than 5% to settle at $39.55 a barrel on Friday, its highest level since March 6th, after reports that OPEC+ reached a tentative deal with Iraq on compliance with quotas for output cuts and is set to meet on Saturday to ratify the deal. The agreement will extend OPEC+ record 9.7 million barrels per day reduction until the end of July. Also, a better-than-expected payroll report for the US raised hopes of a faster recovery for oil demand. Adding some more fuel to the rally was the first tropical storm of the season in the US Gulf of Mexico, which is expected to enter the central Gulf and could make landfall along Louisiana's refinery on Sunday. For the week, US WTI crude added 9.8%, posting its sixth weekly gain.