OPEC has agreed to extend oil supply cuts until March 2020 as the group’s members overcame their differences in order to prop up the price of crude amid a weakening global economy and soaring US production.
Benchmark Brent crude has climbed more than 25 per cent so far this year after the White House tightened sanctions on OPEC members Venezuela and Iran, slashing their oil exports.
OPEC and its allies led by Russia have been reducing oil output since 2017 to prevent prices from sliding amid soaring production from the United States, which has overtaken Russia and Saudi Arabia to become the world’s top producer.
Fears about weaker global demand as a result of a US-China trade spat have added to the challenges faced by the 14-member Organisation of the Petroleum Exporting Countries.
The United States, also the world’s largest oil consumer, is not a member of OPEC, nor is it participating in the supply pact.
Brent initially rose as much as $US2 overnight towards $US67 per barrel as traders cited OPEC’s resolve to curb output but it later pared gains to trade at $US65.
The OPEC meeting on Monday will be followed by talks with Russia and other allies, a grouping known as OPEC+, on Tuesday.
Russian President Vladimir Putin said on Saturday he had agreed with Saudi Arabia to extend global output cuts of 1.2 million barrels per day, or 1.2 per cent of world demand, until December 2019 or March 2020.
Oil prices could stall as a slowing global economy squeezes demand and US oil floods the market, according to a Reuters poll of analysts.
Saudi Energy Minister Khalid al-Falih said he was growing more positive about the global economy after a G20 meeting of world leaders over the weekend.
“The global economy in the second half of the year looks a lot better today than it did a week ago because of the agreement reached between President Trump and President Xi (Jinping) of China and the truce they have reached in their trade and the resumption of serious trade negotiations,” Falih said.
He said Saudi Arabia would continue reducing supplies to customers in July.
He also said he believed US oil output would peak and then plateau, just like the North Sea or other older oil regions.
“The reason for extending the deal by nine months instead of six is to assure the markets that the deal will remain in place through the seasonally soft demand period in the first quarter of 2020,” said Amrita Sen, co-founder of Energy Aspects.
The meeting on Monday continued for six hours as ministers discussed a charter for long-term co-operation with non-OPEC producers.
OPEC, which also confirmed on Monday that its secretary-general Mohammad Barkindo would serve another three-year term, will hold its next meeting on December 5.