Russian president Vladimir Putin said on Saturday he had agreed with Saudi Arabia’s crown prince Mohammed bin Salman to extend their oil production agreement for at least another six months.
The two countries, which are the world’s largest crude oil exporters, have led the so-called Opec+ group since 2016. The full group is due to meet in Vienna on July 1-2, where they are widely expected to rollover their deal to remove approximately 1.2m barrels a day from the market.
“We discussed with Saudi Crown Prince Mohammed bin Salman the possibility of extending the oil output cut agreements. I would like to inform you, as it is of certain importance for the market, that we have agreed we will extend our deal,” Mr Putin said at the G20 meeting in Osaka.
“We will support the extension of the agreement, both Russia and Saudi Arabia, at the amount approved earlier. We will think about the period, whether it is six or nine months. Perhaps, up to nine months.”
Amrita Sen at Energy Aspects said the agreement between Russia and Saudi Arabia almost guaranteed the outcome of the Opec+ meeting.
Saudi Arabia and Russia have been collaborating on oil policy since 2016, partly to combat fast-rising output from the US shale industry, but prices have struggled in recent months, with Brent crude oil more than $10 a barrel off its high for the year of $75 a barrel.
“This combined with a positive outcome from the G20 should allow prices to move higher especially if demand fears abate,” Ms Sen said.
Iran, which is not attending the G20 but is one of the main members of Opec, may however object to Russia and Saudi Arabia seeming to dictate to the group ahead of their decision at the formal Opec+ meetings.
Russia is not a member of Opec, but has led a coalition of other large producers, including Kazakhstan and Mexico, in partnering with the cartel.
The group has far exceeded its targeted cuts of 1.2m b/d in recent months.
Opec members Iran and Venezuela have both seen their exports fall dramatically due to US sanctions. Saudi Arabia has also cut production well below its Opec target, while Russian exports have been hindered by contamination on a major pipeline to Europe.
Nevertheless global supplies are expected to rise in the second half the year, as new pipelines in the US allow more shale production to move to international markets.
The higher oil price supported by the deal has earned Russia an estimated more than Rbs 7tn ($110bn) in budget revenue since it was first struck.
But some of the country’s oil companies have suggested that it should be eased to allow them to exploit recent investments in new fields, arguing that Russia could accept a lower oil price than Saudi Arabia.
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