Oil Inches Higher As OPEC And Allies Extend Historic Production Cuts By Another Month

The Organization of Petroleum Exporting Countries and its allies on Saturday agreed to extend the 9.7 million barrels per day production cuts through July.

What Happened

The OPEC+ countries had agreed in April to make the highest supply cuts in history for the months of May and June as the novel coronavirus (COVID-19) outbreak brought global oil demand to a near halt.

In a statement, OPEC said that the cuts along with the easing of coronavirus-related lockdowns around the world "have helped garner tentative signs of a recovery in the global economy and oil market." Nevertheless, the global oil demand "was still expected to contract by around 9 mb/d for the whole of 2020."

According to the earlier meeting in April, the production cuts were to be reduced to 7.7 mb/d for six months starting July.

Saudi Arabia, Kuwait, and the United Arab Emirates had made voluntary oil cuts of 1.18 mb/d, but aren't planning to extend them beyond June, according to a Reuters report last week.

Oil prices tanked in March and early April as coronavirus dampened demand, and Saudi Arabia and Russia engaged in a price war as they failed to come to an agreement over production cuts.

Price Action

Brent Oil futures for August were up nearly 0.5% at $42.50 at press time. The West Texas Intermediate futures for July were mostly unchanged at 39.57.