OPEC leader Saudi Arabia and non-OPEC Russia have agreed a preliminary deal to extend existing record oil output cuts by one month while raising pressure on countries with poor compliance to deepen their cuts, OPEC+ sources told Reuters.
The agreement was reached on the condition that member countries, led by Iraq and Nigeria, who failed to comply with the agreed output cut for May, must ensure over-compliance going forward in order to make up for the non-compliance of their allocated quotas.
However, there was no agreement yet on whether to hold an OPEC+ output policy meeting on Thursday with the main obstacle being how to deal with countries that have failed to make the deep supply cuts required under the existing pact, the sources said.
OPEC+ had agreed to cut output by a record 9.7 million barrels per day, or about 10% of global output, in May and June to lift prices battered by plunging demand linked to lockdown measures aimed at stopping the spread of the coronavirus.
Rather than easing output cuts , OPEC and its allies, a group known as OPEC+, were discussing keeping those cuts beyond June.“Saudi Arabia and Russia are aligned on the extension for one month,” one OPEC source said.
The two leading oil producers in the cartel are not just demanding that non-compliant member countries implement the output cuts already promised, but also want deeper output cuts in the coming months to make up for their earlier failings.
The group also considered holding an online meeting on June 4 to discuss output policy, after Algeria, which holds the presidency of the Organization of the Petroleum Exporting Countries, proposed bringing forward a meeting planned for June 9-10.
OPEC members like Iraq and Nigeria has shown weak compliance with its output reduction targets in May. Kazakhstan also failed to fully meet its obligations under the OPEC+ oil cut pact, sources said.
Oil prices rose in recent days from the lows of April buoyed by a continuing recovery in China, the epicentre of the coronavirus outbreak, while other economies are slowly opening up after lockdowns to contain its spread.