Russia and Saudi Arabia agree to oil production cut ahead of Vienna conference

Russia and Saudi Arabia have agreed to a deal intended to extend an earlier agreement to keep oil production low, because of abundant world supplies. This was reported by Agence France Press, which quoted Russian President Vladimir Putin on Saturday.

“We will extend this deal, Russia and Saudi Arabia. For how long? We will think about that. For six or nine months. It is possible that it could be up to nine months,” Putin told reporters after a G20 summit in Osaka, the agency reported.

The Organization of the Petroleum Exporting Countries (OPEC), which produces close to one third of the world’s oil and fellow oil-producing nations had agreed in December 2018 to cut daily crude output by 1.2 million barrels.

OPEC will be holding a high profile meeting in Vienna on Monday-Tuesday. The meeting comes against a background of ample global crude supplies, according to OPEC and the International Energy Agency (IEA).

Russia’s deal with Saudi Arabia on crude production cuts shows their commitment to stabilizing the oil market, Russian Energy Minister Alexander Novak said in a statement on Saturday.

Novak said that Russia and other oil producers have all supported a proposal to extend the global oil output cut deal, adding it would be better to extend production cuts by 9 months.

Meanwhile, Iraq’s Oil Minister Thamer al-Ghadhban was also reported as saying on Sunday that he expected a global deal cutting crude production to be extended by six to nine months and that his country would support all such efforts to improve stability in the oil market.

A statement attributed to the minister read “The main oil producers are heading towards a decision to extend the oil production agreement by six to nine months.” Iraq will also be participating in the OPEC and its allies conference in Vienna on Monday and Tuesday.

“Iraq’s position is positive, deals with the reality of the challenges of the oil market and supports all (efforts) related to balancing oil supply and demand.”

Saudi Energy Minister Khalid al-Falih also said the deal would most likely be extended by nine months and no deeper reductions were needed.

“It’s a rollover and it’s happening,” al-Falih, whose country is the de facto leader of OPEC, had  told reporters earlier.

The pact is due to expire on Sunday and currently involves curbing oil output by 1.2 million barrels per day.

Oil ministers from the Organization of the Petroleum Exporting Countries meet on Monday in Vienna, followed by talks with non-OPEC oil producers on Tuesday.

The United States, the world’s largest oil producer ahead of Russia and Saudi Arabia, is not participating in the pact.

The United Arab Emirates’ energy minister said on Sunday he hoped for a productive outcome from the Vienna meetings, according to his official Twitter account.

“Confident the alliance will reach a decision that will restore oil market balance,” Suhail bin Mohammed al-Mazroui tweeted.

A nine-month extension would mean the deal runs out in March 2020. Russia’s consent means the so-called OPEC+ group may have a smooth meeting if OPEC’s third-largest producer Iran also endorses the arrangement.

New US sanctions on Iran have more than halved Iran’s oil exports with main export countries like China and India buckling under US pressure. The sanctions are meant to weaken Iran’s economy and force it to the table to renegotiate the 2015 nuclear deal it had signed with the P5 and EU.

          – With input from agencies

Aditi Bhaduri

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