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 could help to underpin the oil market recovery, easing the financial pain felt by oil producers like Nigeria and helping to ease Petrodollar shortages in their economies.
It’s also a victory for Saudi Arabia and Russia, who put a price war behind them to successfully lobby Iraq, Nigeria and others to fulfill their promises to cut production.
“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.
Brent crude posted a sixth weekly gain in London, more than doubling to $42.30 a barrel since April with traders anticipating tighter supplies as demand recovers from lockdown. U.S. President Donald Trump on Friday hailed the cuts from OPEC and its allies for saving America’s energy industry, and U.S. Energy Secretary Dan Brouillette welcomed the deal on Saturday.