OPEC, Russia to extend record oil production cuts

Many of the world’s major oil producers agreed over the weekend to extend the record oil production cuts that have helped bolster oil prices since their collapse in April in the depths of the coronavirus pandemic.

Oil ministers from the Organization of the Petroleum Exporting Countries, as well as other producers led by Russia, met by video conference Saturday and reached an agreement to continue cutting 9.7 million barrels a day — about 10% of global output in normal times — through July, OPEC said in a news release.

Under the original agreement reached April 12 by the combined producers’ group, known as OPEC Plus, production was set to increase in steps after June.

The recognition that the cuts need to continue shows that despite the recent rise in oil prices, large producers remain worried that the oil market could fall apart again.

Prince Abdulaziz bin Salman, the Saudi oil minister, noted that concern in a speech to the

OPEC Plus meeting, which he headed.

“Demand is returning as big oilconsuming economies emerge from pandemic lockdown,” he said. “But we are not out of the woods yet.”

One risk is that reviving the world economy after the worst of the pandemic passes will prove more difficult than investors anticipate. While production cuts and voluntary closings of oil wells have helped bring demand and supply closer to balance, there are still huge stocks of oil in tank farms and on ships that could flood the market.

“Warning flags are still flying here,” said Robert McNally, president of Rapidan Energy Group, a market research firm.

McNally noted that the April price crash dramatically altered the dynamic between Saudi Arabia and Russia, which engaged in an illtimed price war after a failed OPEC meeting in early March. The Saudis sharply boosted production in April, just as the effects of global shutdowns were hitting oil demand hardest.

That contributed to the crash in oil prices in late April.

With traders anticipating a new deal, benchmark U.S. crude oil for July delivery settled at $39.55 per barrel Friday.

International standard Brent crude oil for August delivery rose to $42.30 per barrel, both up nearly 6%.

The shocking price drops coupled with pressure from President Trump, who was worried about job losses in the oil industry in the United States, led Riyadh and Moscow to abruptly change their approach and resume their cooperation.

The two oil giants also pressured Iraq, the secondlargest producer in OPEC, to state publicly that it would comply with its commitment to cut production by about 1 million barrels per day. Analysts have estimated that Iraq has been missing that target by hundreds of thousands of

barrels a day.

“Each of the 23 countries represented here must be on guard for any signs of backsliding from their commitments,” the Saudi minister said, warning that production would be closely monitored.

Stanley Reed is a New York Times writer.