Oil cartel Opec agreed to extend supply cuts by nine months today, in an attempt to maintain the price of oil in face of soaring US production and fears of a global economic slowdown.
Opec is meeting today in Vienna and is holding a further meeting tomorrow with Russia and other allies.
Opec and its allies have been cutting output since 2017 to support oil prices in the face of increased production from the US, which this year became the world’s biggest producer ahead of Saudi Arabia and Russia.
Trade tensions between the US and China have also raised fears that a global slowdown could hurt demand.
Russian President Vladimir Putin said on Saturday he agreed to extend existing output cuts of 1.2m barrels per day, or 1.2 per cent of global demand, by six to nine months – until December 2019 or March 2020.
Previously agreed supply cuts were scheduled to end on Sunday.
The decision comes despite demands from US President Donald Trump that Saudi Arabia keeps pumping oil to keep prices down.
Benchmark Brent crude has climbed more than 25 per cent so far this year after the White House tightened sanctions on Opec members Venezuela and Iran, slashing their oil exports.
Mihir Kapadia, chief executive of Sun Global Investments, said: “It should come as no real surprise that Opec has agreed to extend oil supply cuts until March 2020 following their meeting today in Vienna, with the slowing demand becoming an ever-increasing factor.
“Ministers from the 14 nations have agreed to continue this policy as they look to get prices back up to $70 per barrel in the coming months.
“However, the decision still needs to be ratified by non-OPEC allies on Wednesday, but this should not be an issue going as Russia has already given their approval.
“Oil prices this year have benefited from a geo-political premium this year, countering loses from fears of a global growth slowdown.”
Gary Ross from Black Gold Investors said: “Saudi Arabia is doing its best to achieve oil prices at $70 per barrel despite what Trump wants. But they haven’t accomplished that even with Iranian and Venezuelan oil exports dropping. And the reasons for that are weak demand and U.S. shale growth.”
The price of a barrel of Brent crude rose 1.48 per cent to $65.70 today.