The Organization of the Petroleum Exporting Countries (OPEC) is extending its oil production cuts into 2020 due to weakening demand and a shaky outlook for the global economy.
The decision to extend the production cuts needs to be ratified by non-OPEC allies, but several of those nations, such as Russia, have already given their approval. Oil in London traded up 1.4% at $65.62 a barrel on Tuesday morning, paring earlier gains following widespread
expectation of continued cuts.
The current version of the OPEC deal calls for production curbs of 1.2 million barrels a day, though the alliance has cut more than it pledged as U.S. sanctions on Iran and Venezuela slashed output from both countries.
Saudi Arabia has unilaterally made deeper curbs, pumping 9.73 million barrels a day in June, according to a Bloomberg survey of officials, analysts and ship-tracking data. That compares with its OPEC+ ceiling of 10.3 million.
By pushing through an extension of the oil production cuts to March 2020, Saudi Arabia is seeking to avoid cliff hanger meetings, when the group gathers only days -- or even hours -- before a round of curbs expire, according to a delegate briefed on the strategy.
OPEC will meet before the end of the year, perhaps in December, giving the cartel a cushion of several months between its next meeting and the end of the current agreement.
Since OPEC joined forces in 2016 with other producers including Russia, Kazakhstan and Mexico, they have sought to establish an enduring basis for cooperation. But Iran has voiced unhappiness with the dominance that non-member Russia -- not to mention regional rival Saudi
Arabia -- exert over OPEC policy.
The decision to extend production curbs through next March comes as the International Energy Agency and other market watchers scale back forecasts for demand amid sluggish growth in China and India. At the same time, American shale production has set fresh records, putting the
U.S. on the verge of becoming a net oil exporter.
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