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OPEC, Russia and their allies hold talks on Saturday on extending record oil production cuts that have doubled oil prices since April and will push countries such as Iraq and Nigeria to deliver better compliance with the curbs. Nigeria’s oil minister said he expected an extension deal, which already has the backing of Russia and Saudi Arabia, to be concluded in the video conference despite “reservations of one or two member countries,” which he did not name.
The alliance is known as OPEC+ previously agreed to cut supply by a record 9.7 million barrels per day (bpd) during May-June to prop up prices that collapsed due to the coronavirus crisis. Cuts were due to taper to 7.7 million bpd from July to December. OPEC+ sources have said Riyadh and Moscow agreed to extend existing cuts throughout July, although Riyadh was seeking a further extension to August and possibly even December.
OPEC’s de facto leader Saudi Arabia and Russia have to perform a balancing act by getting oil prices higher to meet their budget needs while not pushing them much above $50 a barrel to avoid encouraging a resurgence of rival U.S. shale production. Global benchmark Brent crude, which slumped below $20 a barrel in April, rose nearly 6% on Friday to end at a three-month high above $42. That is still more than a third less than the price of oil at the end of 2019.
Saturday’s talks start with discussions between members of the Organization of the Petroleum Exporting Countries at 1200 GMT, followed by a gathering of the OPEC+ group at 1400 GMT, OPEC said on Friday. “A formal announcement of a roll-over of the April 12 decision is expected to be made, the reservations of one or two member countries notwithstanding,” Nigeria’s minister of state for petroleum resources, Timipre Sylva, said in a statement.
OPEC sources said an extension was contingent on compliance as countries that produced above their quota in May and June must compensate by cutting more in future months. Nigeria’s petroleum ministry said Abuja backed the idea of compensating for its excessive output in May and June.
Iraq, which had one of the worst compliance rates in May, also agreed to additional cuts, OPEC sources said, although it was not clear how Baghdad would reach an agreement with oil majors in the country on curbing output.