The Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC allies, known as OPEC+ have agreed to extend the 10-million-barrel-per-day (mbd) first phase of the oil output cut by one month, to July 2020.
The group disclosed this in a statement released at the end of its online meeting in Vienna on Saturday.
It would be recalled that OPEC and its allies under the OPEC+ had agreed to cut supply by up to 10 million barrels per day between May and June 2020.
Also, eight million barrels per day between July and December 2020 and six million barrels per day from January 2021 to April 2022.
The group at the just-concluded meeting agreed that countries that subscribed to the Declaration of Cooperation (DoC) that were unable to fully conform to the cut in May and June 2020 would be compensated.
According to the agreement, the compensation will be accommodated in their cut for July, August and September, in addition to their already agreed production adjustment for such months.
The OPEC+ also called on other major oil producers across the world to proportionally contribute to the stabilisation of the oil market, taking into consideration the substantial effort made by the OPEC and non-OPEC Participating Countries of the DoC.
The meeting further emphasised that it was vital that DoC participants and all major producers remain fully committed to efforts aimed at balancing and stabilising the market.
In this regard, it was noted that global oil demand was still expected to contract by around nine million barrels per day (mb/d) for the whole of 2020.
The agreement reads: “In view of the current fundamentals, and following the agreement reached at the 179th Meeting of the OPEC Conference, all Participating Countries reconfirmed the existing arrangements under the April agreement.
“Subscribed to the concept of compensation by those countries who were unable to reach full conformity (100 per cent) in May and June, with a willingness to accommodate it in July, August and September, in addition to their already agreed production adjustment for such months.
“Agreed the option of extending the first phase of the production adjustments pertaining in May and June by one further month.
“Recognised that the continuity of the current agreement is contingent on them fulfilling elements 1 and 2 above.
“Agreed without dissent that the full and timely implementation of the agreement remains inviolable, based on the five key elements, and endorsed the ‘Statement on the Declaration of Cooperation,’ which is annexed to this Press Release.
“The Meeting also called upon all major oil producers to proportionally contribute to the stabilisation of the oil market, taking into consideration the substantial effort made by the OPEC and non-OPEC Participating Countries of the DoC.”
Earlier, the Secretary-General of OPEC, Dr Mohammad Barkindo, said the global oil demand is still expected to shrink by more than 17 million barrels per day
“The very early green shoots of revival are evident; we do hope that we have turned a corner.
“Nevertheless, global oil demand is still expected to shrink by more than 17 million barrels per day in the second quarter of 2020, and while it is expected to ease in the second half of the year, for the whole of 2020, the contraction is still forecast to be around 9.1 mb/d,’’ he said
According to him, it will bring global oil demand to 90.6mb/d; back to levels last seen before the 2014-2016 market downturn.
“It underscores the fact that we cannot rest on our laurels. We need to maintain the laser focus on helping bring supply and demand back into balance and providing a more stable market in the coming months.
“This is not the time to stand back and admire what we have achieved thus far; we do not want to jeopardise these successes in any way.
“We also need to appreciate that the waters remain choppy, and as we navigate our journey, it will not be plain sailing, but we have to remain resolute. It is in the interests of us all,” he added.