OPEC, Russia agree to more cuts in oil supply

Many of the world’s major oil producers agreed on Saturday 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 on Saturday and reached an agreement to continue cutting 9.7 million barrels a day — or about 10 percent of global output in normal times — through July, OPEC said in a news release.

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

The recognition that the deep cuts need to continue for a month or perhaps longer shows that despite the recent surge in oil prices, the 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+ meeting, which he headed.

“Demand is returning as big oil-consuming 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 are now anticipating. 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 ill-timed 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, both Brent crude and West Texas Intermediate crude soared by nearly 6 percent on Friday, to $42.30 a barrel for Brent crude and $39.55 a barrel for the West Texas crude. The markets were closed Saturday.

Oil ministers and other producers led by Russia met by video conference Saturday and agreed to a cut of about 10 percent.