OPEC moves to recover oil prices

The Organisation of Petroleum Exporting Countries and its allies (OPEC+) have agreed to extend the current record output cuts by another one month to further support the oil price recovery.

The current output cut, which is to terminate at the end of this month, is part of the measures taken by the cartel to help rebalance the oil market.

The agreement to this deal by all member countries precedes yesterday’s meeting of the alliance through a video conference.

The group agreed to maintain its current output cut of 9.7 million barrels per day till the end of July as against the 7.7 million barrels per day initially planned.

This is seen as a victory for Saudi Arabia and Russia who have been trying to persuade other members to implement the cuts.

The Algerian oil minister, who is also the president of OPEC, praised the efforts of Saudi Arabia, United Arab Emirates, Kuwait and Oman for offering voluntary additional cuts for the month of June amounting to 1.2 million barrels per day. He said by the first half of 2020, oil stocks are expected to increase by an unprecedented 1.5 billion barrels.

Nigeria had, a few hours earlier, reconfirmed its commitment under the existing agreement of 9.7 million barrels per day output cut. It also committed to making additional oil output cuts from July to September to compensate for producing more than its quota in May and June. This was confirmed in a tweet from the Federal Ministry of Petroleum Resources on its official twitter handle.

Meanwhile, the news of the agreement made positive impact on crude oil prices as the Brent crude went up by more than 5%, selling for $42.30 per barrel yesterday. This is the highest in about three months. The American WTI crude went up by more than 5% to close at $39.55 per barrel, while the Nigerian Bonny light crude went up by 2.90% to sell for $41.17 per barrel, the highest in five months.

Apart from Nigeria, other traditional laggards on OPEC+ output cuts had promised a couple of times to do better this time around, although some analysts are skeptical about this. (Nairametrics)