Monday saw a major announcement from major oil-producing nations around the world.
OPEC recently held a meeting in regards to whether they would be continuing their production cuts into the rest of the year, or possible keeping them where they are. The cartel announced that they had indeed vowed to roll over its production cuts and extend them through to Q1 2020.
Recent increases in America’s oil output have been depressing oil prices for the past few months, leading to a potential crisis among OPEC countries who have already cut production once before in an effort to restore prices.
However, recent tensions between Iran and the U.S. alongside a series of oil tanker attacks have sent oil prices skyrocketing again. Going into the discussions with these thoughts in mind, OPEC went into the meeting with these thoughts in mind as oil experts wondered whether the cartel would keep cuts as they were, or possibly extend them further.
OPEC’s discussions also involved their relationship with Russia, a valuable alliance for them as the cooperation of the European energy giant is needed in order to compete with U.S. shale producers. However, longstanding members of the cartel say they are feeling ostracized by the alliance.
As reported by The Wall Street Journal, OPEC also discussed whether or not they should continue their alliance with Russia to balance the oil markets once the nine-month plan concludes. Despite initial objections from Iran, all parties reached a compromise on a long-term cooperation plan with Russia.
“I think Russia’s influence is welcome,” said Saudi Energy Minister Khalid al-Falih on Monday, responding to questions about Russia’s influence on internal OPEC matters and whether the country was slowly seizing a dominant leadership position in the relationship. “I don’t think Russia is calling the shots. Russia is respectful of Saudi Arabia and has agreed to roll over after we convinced them it is the correct move for the market. Russia does not dictate to us and we do not dictate to them,” the minister added.
Overall, OPEC agreed on Monday that they would continue production cuts of 800,000 barrels a day for the next nine months, and on Tuesday would come together with 10 countries led by Russia to finalize the agreement alongside an extra 400,000 barrel per day cut from non-OPEC oil-producing nations.
A nine-month agreement for OPEC is quite unusual, as they tend to last six months for the most part. However, oil producers have been worried that China’s normally strong appetite for oil could be impacted by the ongoing trade dispute between the U.S.
While Monday saw a number of positive announcements from President Trump, with one of them being that trade talks would be resuming soon with China, it’s anyone’s guess as to how long it will take for any agreement to come together, if one will at all.
Despite the supply cuts, oil prices ended up falling on the fear that a faltering global economy would impact global demand for oil. Brent crude futures fell by 0.5 percent to $64.73 per barrel, while West Texas Intermediate crude fell by 48 cents, or 0.8%, down to $58.61 per barrel.