The Organization of the Petroleum Exporting Countries (OPEC) held its 11th ministerial meeting on June 6 and agreed to extend record oil production cuts until the end of July, according to a press release.
The OPEC meeting focused on the issue of non-compliance and have created a compensation system for those countries who did not 100% comply in May and June. It is expected that these nations will accommodate their overproduction by further cutting production in July, August, and September alongside the previously agreed cuts.
Moreover, the first phase of the production adjustment will be extended for one further month, thus the continuity of the current agreement and the compliance of all members in full and timely implementation is a must.
“Demand is returning as big oil-consuming economies emerge from pandemic lockdown. But we are not out of the woods yet and challenges ahead remain,” Saudi Energy Minister Prince Abdulaziz bin Salman told the video conference of OPEC+ ministers, according to Reuters.
This decision has been taken after global oil prices have more than doubled following the success of the oil production cuts so far. OPEC+ agreed to cut its combined output by around 10 million barrels per day (mmbbl/d), or 10% of global oil production, in May and June.
It was initially agreed that production cuts of 9.7 mmbbl/d would only last in May and June and that from the period of July to December the cuts would ease to 7.7 mmbbl/d. However, OPEC+ have now decided to prolong these production cuts to further aid global oil price recovery.