Russia agreed with Saudi Arabia to extend an agreement with Opec on reducing oil production by six to nine months, Russian President Vladimir Putin said, as oil prices are under renewed pressure from the # 39. ; increase in US supplies and the slowdown in the global economy.
The Saudi energy minister, Khalid al-Falih, said Sunday that the deal will probably be extended by nine months and no deeper reductions are needed.
Putin, speaking after talks with the Saudi crown prince, Mohammed bin Salman, said at a press conference that the agreement – which should expire Sunday – would be extended in its current form and with the same volumes.
The Organization of Petroleum Exporting Countries, Russia and other producers, an alliance known as OPEC +, meet on 1-2 July to discuss the agreement, which provides for containment of oil production of 1.2 million barrels per day.
The United States, the largest oil producer in the world before Russia and Saudi Arabia, does not participate in the pact.
"We will support the extension, both Russia and Saudi Arabia. As for the duration of the extension, we still have to decide whether it will be six or nine months. Perhaps it will be nine months," Putin said. who met the crown prince on the sidelines of a G20 summit in Japan.
Falih, arriving in Vienna for the OPEC + talks, told reporters when asked about Saudi preferences: "I think a nine-month extension is more likely."
Asked about a deeper cut, Falih said: "I don't think the market needs this."
"The demand is easing somewhat, but I think it is still healthy," the Saudi minister said, adding that he expected the market to stabilize in the next six to nine months.
A nine-month extension would mean that the agreement will expire in March 2020. The Russian consensus means that the OPEC + group could have a smooth meeting if also the third producer of Opec, Iran, will support the agreement.
The new US sanctions on Iran have reduced exports to a trickle while Washington seeks to change what it calls a "corrupt" regime in Tehran. Iran has denounced the sanctions as illegal and claims that the White House is run by "mentally retarded" people.
Kirill Dmitriev, managing director of the Russian Direct Investment Fund which contributed to the design of the Opec-Russia operation, said that the pact in force since 2017 has increased the revenue of the Russian budget by over 7 trillion rubles (110 billion of dollars).
"The strategic partnership of Opec + has led to the stabilization of the oil markets and allows both to reduce and increase production according to the conditions of the market demand, which contributes to the predictability and growth of investments in the sector," said Dmitriev.
The Brent benchmark crude rose more than 25% from the start of 2019. But prices could stall while the global economy in slowdown squeezes demand and US oil flooded the market, according to a Reuters analyst survey.
Falih said the new agreement would help reduce global oil stocks, balance the market and stimulate investments in future energy supplies.
"The agreement confirms that the Russian-Saudi partnership has paved the way to guarantee the interest of producers and consumers and the continued growth of the global economy," tweeted Falih.
That Russia and Saudi Arabia have actually announced the agreement before the Opec rallies can anger the smaller members of the organization, who feel marginalized.
"Who needs an OPEC meeting?", Said a delegate after hearing about the titles of the Russia-Saudi Arabia talks. Some delegates said Iran could still fight Monday.
Russia's minister for Russia, Alexander Novak, said he believes most of the members of the OPEC, including Iran, have already expressed support for extending the agreement on the cut of production. He said it could be wise to extend the agreement by nine instead of six months to avoid increasing production during weak seasonal demand.
"It may be appropriate to maintain the agreement in force during the winter period," he told reporters.
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