Russians, Saudis Agree to Maintain Oil Cuts for 9 Months

Russian President Vladimir Putin said he agreed with Saudi Crown Prince Mohammed bin Salman to extend the OPEC+ deal at current production levels for the rest of this year and potentially into early 2020.

The comments, at the Group of 20 Summit in Japan, make the outcome of the OPEC meeting on July 1-2 in Vienna, Austria, a foregone conclusion, and further reinforce Putin’s role as the ultimate policymaker within the group, Bloomberg reported.

Saudi Arabia and Russia ended years of animosity in 2016 to join forces to manage the global oil market in an effort to prop up prices. The current version of the deal by the group known as OPEC+ calls for production cuts of 1.2 million barrels a day, which were due to expire at the end of June.

“We have agreed: we will continue our agreements,” Putin said in Osaka. “In any event, we will support the continuation of agreements both Russia and Saudi Arabia in the volumes previously agreed.”

Putin said the extension could last between six and nine months, marking the first time a senior leader from the group has indicated the curbs could be needed into 2020. That reflects a somber outlook for oil supply and demand next year due to a combination of a slowing global economy and rising US shale output.

The Russia-Saudi deal followed an agreement made earlier in Osaka between the US and Chinese presidents to restart trade talks and comments by US President Donald Trump that he would not impose new duties on Beijing.

“The Saudi-Russia deal, combined with a positive outcome from the US-China trade talks at the G-20, should allow oil prices to move higher,” said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. in London.