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U.S. President Donald Trump believes OPEC+ and Saudi Arabia and Russia specifically will stick to their oil production cut agreement, a senior Washington official told Reuters, adding that a change of course would harm the global economy.
“We trust that other major oil producers will not revert to policies that impede an orderly and swift recovery from these unprecedented global economic conditions,” the official said.
Reuters recalls Trump’s conversations with Saudi Crown Prince Mohammed, during which he effectively threatened to pull out U.S. troops stationed in the Kingdom unless Saudi Arabia continued to pump oil at reduced rates, and with Russia’s Vladimir Putin. No details were released about this particular call, although the OPEC+ cuts were one of the topics discussed.
OPEC+ is currently producing 9.7 million bpd less than a baseline agreed in early April. For most OPEC+ members, the baseline was their average daily production rate from October 2018 but for Saudi Arabia and Russia, it was their average daily in March, from which both had to cut to 8.5 million bpd. Yet Saudi Arabia said it would cut a million bpd deeper as a show of goodwill, while Nigeria and Iraq again lagged in compliance, per May data.
The 9.7-million-bpd cuts were to be in effect over May and June, after which they were to be eased to a total 7.7 million bpd, to stay in effect until the end of this year. From 2021, the caps would ease further to 5.8 million bpd, to remain in effect until the end of April 2022.
Yet now there has been talk, backed by Saudi Arabia, to keep the caps at 9.7 million bpd beyond the end-June expiry of this phase of the deal. There were reports late last month that Russia’s Alexander Novak was discussing the extension of the deeper cuts with oil companies. It remains to be seen whether they had agreed.
OPEC+ was supposed to meet next week but the meeting may be moved to this week to give Saudi Arabia, Iraq, and Kuwait to make their next export allocations.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.