Oil: towards an extension of the Opep + agreement
Oil prices reached their highest level in three months on June 2, 2020 (illustration image). Reuters / Jessica Lutz
By: Claire Fages Follow
Oil prices reached their highest level in three months on Tuesday, June 2, at nearly $ 40 a barrel. The markets anticipate an extension of production reductions in OPEC +, the alliance between OPEC and Russia.
The reduction in oil production could continue beyond the end of June, on the part of OPEC and its allies, including Russia. This is what caused a rebound in the price of Brent to 39.33 dollars on Tuesday, June 2, nearly 3% increase. On April 12, the 13 OPEC members led by Saudi Arabia had reached an agreement with their 10 Russian-led allies to reduce their production by 9.7 million barrels per day, in May and June. It was a record reduction, corresponding to 10% of the world supply.
Little respected quotas in May
However, this agreement was not fully respected in May. OPEC has only met its quotas three-quarters, calculated Bloomberg. Iraq is only at 42% of its reduction commitments, Nigeria at 33%! Even Saudi Arabia produced 200,000 barrels more than it had pledged. It must be said that in parallel, OPEC + counted on the decline of productions in the United States and Canada, which are not part of the cartel. Will the latter be more scrupulous in June? An agreement between Saudi Arabia, the United Arab Emirates and Kuwait for a collective reduction of just over 1 million barrels a day suggests this.
Extension of the agreement until September?
Negotiations now relate to the timetable for this reduction in production. Saudi Arabia argued for a six-month extension of the collective effort. Russia seems ready for only a month of additional effort. A compromise could be found over two more months, that is to say until September 1, the time that the demand for oil starts again frankly, after the epidemic of coronavirus. OPEC + is officially scheduled to meet on June 9 and 10, but at the request of Algeria, which currently chairs OPEC, the oil ministers' videoconference could be brought forward to June 4.
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