Oil Rises To $38 As OPEC+ Discusses Production Cut Extension

The Organisation of Petroleum Exporting Countries and its allies led by Russia are moving closer to a compromise on extending current oil output cuts and are discussing a proposal to roll over supply curbs for one to two months.

The international oil price benchmark, Brent crude, stood at $38.51 per barrel as of 9:30pm Nigerian time on Monday.

OPEC and its allies, a group called OPEC+, decided in April to cut output by a record 9.7 million barrels per day, or about 10 per cent of global output, to lift prices battered by a demand drop linked to lockdown measures aimed at stopping the spread of the coronavirus.

Reuters quoted OPEC sources as saying that rather than easing output cuts in July, the de-facto OPEC leader, Saudi Arabia, was leading discussions on sustaining them until the end of the year.

However, it was yet to win support from Russia, which believes curbs could be eased gradually.

“It is the proposal now, but it is yet to be finalised,” one OPEC+ source said of the one to two-month extension.

“It’s for a month or two, not for half a year,” one Russian oil source was quoted as saying, on the rollover of the existing cuts.

Another OPEC+ source said there was support for Russia’s proposal for an extension of one month, but added that there no consensus on it yet.

The group is likely to hold an online meeting on June 4 to discuss output policy, after Algeria, which currently holds the presidency of OPEC, proposed a meeting planned for June 9-10 be brought forward.

Reduced production from OPEC+ combined with a record decline in output from non-members such as the United States and Canada have helped to lift oil prices towards $35 per barrel, but they remain at only half the level of the start of the year.

Algeria has proposed that the OPEC+ meeting be brought forward to facilitate oil sales for countries such as Saudi Arabia, Iraq and Kuwait. Russia has no objection to the meeting being brought forward to June 4.