VIENNA – Russia and nine other producers linked to OPEC decided on Tuesday to stick to a decision to cut the supply of crude oil until March 31, 2020.
The meeting “decided to defend the decision made (in December) for a period of nine months,” said Venezuela’s Oil Minister Manuel Quevedo, following the sixth ministerial meeting of OPEC+ (OPEC and its allies).
December’s agreement involved the withdrawal of 1.2 million barrels per day of crude oil from the market as of January 1, 2019. That’s the equivalent of 1.2 percent of the world’s estimated demand for 2019.
Instead of expiring on June 30 as originally scheduled, the measure will continue until March 31, 2020, as a result of “large uncertainties” looming over the global oil market, according to a final statement by OPEC.
The meeting took place a day after the 14 members of the Organization of the Petroleum Exporting Countries (OPEC) took a first step to approve the extension, which was proposed by Riyadh and Moscow on Saturday.
Russian President Vladimir Putin had announced the measure after meeting with Saudi Crown Prince Mohammed bin Salman at the G20 summit in Japan, so the events in Vienna did not come as a surprise to the markets.
The world’s two largest oil exporters, namely Saudi Arabia (a member of OPEC) and Russia (a non-member), formed an alliance in 2016 to tackle the growing offer from the United States, which presented a challenge for their economies as they are highly dependent on oil revenues.
The shale oil boom has helped transform the US into the world’s leading producer of “black gold,” relegating Russia and Saudi Arabia to second and third place.
Supply cuts have contributed to the partial recovery of the price of the barrel, which had collapsed to less than $30 in January 2016 from about $115 in mid-2014.
The price of Brent crude, the main international benchmark, is currently around $65 per barrel.