‘We cannot afford to rest on our laurels,’ said Mohamed Arkab, Algeria’s oil minister and OPEC’s rotating president ahead of the meeting.
Photo: Stefan Wermuth/Bloomberg NewsOPEC finalized on Saturday an extension of their record oil-production curbs through July, delegates said, after Iraq and Nigeria agreed to slightly deeper cuts to compensate for their failure to adhere to recent agreements.
The deal, however, still needs to be ratified by a Russia-led group of non-OPEC allies. Moscow has already signaled it was behind the deal.
In the aftermath of a demand-draining coronavirus pandemic and a devastating price rout, the 23-nation alliance of the Organization of the Petroleum Exporting Countries and its allies is moving cautiously to rebalance a global oil market in the early stages of recovery. Led by Saudi Arabia and Russia—and prodded from afar by the Trump administration—the group agreed in April to cut output by 9.7 million barrels a day.
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The agreement called for the curbs to begin easing at the end of June. But OPEC officials said the group had to remain cautious amid an uncertain return of global demand for crude.
“We cannot afford to rest on our laurels,” said Mohamed Arkab, Algeria’s oil minister and OPEC’s rotating president ahead of the meeting.
Saudi Arabia and others in Persian Gulf told other countries they will continue cutting more than they agreed to make up for countries such as Mexico, which have said they are unable to fully participate in the effort. The Gulf producers said at the meeting that they were already overcomplying by 1.2 million barrels a day in May.
Nigeria and Iraq, which in May reduced its output by only half of its commitments, will also make up for their backlog of reductions with deeper cuts over the next three months, according to Nigeria’s oil minister Timipre Sylva and other OPEC delegates.
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Mexico has said it wouldn’t pursue curbs beyond June but OPEC nations have agreed to take on Mexico’s share of the production cuts. The Latin American nation plans to implement longstanding plans to revive its oil industry.
“We aren’t able to adjust our production more, we have already closed oil wells to make good out of the commitment we made,” Mexico’s President Andrés Manuel López Obrador said Saturday.
OPEC-Plus compliance with the May deal was 89%, meaning the group fell some 1.1 million barrels short of the target set in the April agreement, said commodities-data firm Kpler. Along with Iraq and Nigeria, Angola and Kazakhstan’s compliance efforts fell short, Kpler said.
At a technical OPEC meeting Wednesday, delegates were told to be cautious about an oil-market recovery as China, the U.S. and Europe ease restrictions on movement that followed the outbreak of Covid-19, according to people briefed on the meeting.
Despite an expected recovery in global oil demand, Chinese imports may not bounce back as strongly as expected, as the Asian nation has filled up its stocks with cheap oil, the delegates said they were told.
News of the coming OPEC deal, along with an upbeat U.S. jobs report for May, already pushed oil prices higher on Friday. Brent crude futures, the global benchmark of prices, rose 5.8% to $42.30 a barrel, hitting their highest level since early March—around the time of the last OPEC meeting when the collapse of talks between Riyadh and Moscow resulted in an oil-price war and contributed to a plunge in prices.
West Texas Intermediate, the U.S. crude benchmark, added 5.7% to $39.55 a barrel.
But analysts said the latest deal didn’t leave much room for the cartel to maneuver to boost prices. “The market has mostly priced this one-month extension scenario in,” said Bjornar Tonhaugen, head of oil markets at consulting firm Rystad Energy. “So the upside to flat price is fairly limited if OPEC Plus doesn’t have additional cards up its sleeve.”
Write to Benoit Faucon at benoit.faucon@wsj.com, Summer Said at summer.said@wsj.com and David Hodari at David.Hodari@dowjones.com
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