OPEC member have concluded a two-day meeting in Vienna, Austria.
The 14-member group agreed to extend oil production caps for another nine months and signed a long-term cooperation charter with the larger OPEC+ group. CGTN’s Natalie Carney has more from Vienna.
The decision by the world’s largest oil producers to extend production cuts until March 2020 came as no surprise.
The energy alliance between OPEC and non-OPEC partners, has been slashing output since 2017.
Prior to the Vienna meetings the Crown Prince of Saudi Arabia Mohammed bin Salman and Russian President Vladimir Putin publicly agreed to the extensions, irking other OPEC members, namely Iran, which saw the unilateral move as a snub to the cartel.
Last January, the cartel agreed to reduce output for six months by 1.2 million barrels a day. The extension into next year aims to keep crude prices high amid a sluggish global economy and surging production from the U.S. Expanding stockpiles of U.S. crude is contributing to a potential glut.
”The whole purpose of this cut agreement is to bring down the inventories to the 5-year average,” Weal Hussein, Independent Energy Analyst said. “However, there is expectation that next year that non-OPEC supply will increase by a significant amount. If we look at the OPEC numbers, the increase in the non-OPEC supply next year will be around 2.14 million barrels per day and the outlook for demand is still uncertain.”
Many analysts say the demand from China has weighed heavily over the last two days in the wake of a trade truce between Beijing and Washington.
According to Angelo Ciavarella, Head of Global Markets at Infinox Capitol, “Of course, it’s a game changer for them. Imagine if the global trade war keep escalating, then China one of the biggest consumers of oil soon, after the U.S., would demand less and therefore the global oil demand, which this year is forecast is pretty weak compared to the previous years, as a matter of fact its falling compared to the previous two to three years so it would hit the price of the oil.”
Also significant was the signing of the long-term cooperation charter. In effect, this confirms the commitment of all OPEC and non-OPEC partner countries, such as Russia, which has been accused of having too much influence over the alliance.
“It’s not only a historic document, which solidifies our cooperation in the long run, but it also gives us a very solid foundation for joint future analysis of the market and the platform to make decisions needed to stabilize the market when required,” said Alexander Novak, Russian Oil Minister.
The last extension expired on June 30th, so the new one is set to take effect immediately.
Russia and other members of OPEC+ will next meet in September at the World Energy Congress in Abu Dhabi. While OPEC nations are set to meet in December to review the effects of the production cuts.