OPEC members sat down Tuesday with other major oil producing nations to finalize a plan to cut production for another nine months in a bid to shore up prices at a time of waning demand.
Khalid Al-Falih, Minister of Energy, Industry and Mineral Resources of Saudi Arabia arrives for a meeting of the Organization of the Petroleum Exporting Countries, OPEC, and non OPEC members, at their headquarters in Vienna, Austria, Tuesday July 2, 2019. (Photo: AP)
Members of the Organization of the Petroleum Exporting Countries agreed on Monday to the extension of the cut and key non-OPEC member Russia has urged others to agree as well.
"In the current unstable market and the huge uncertainty we are seeing, our coordinated action aimed at consecutive and stable supply to the market and ensuring its stability are key to give us longer visibility," Russian Energy Minister Alexander Novak told other non-OPEC producers at the meeting.
The 10 non-OPEC nations present at the meeting at OPEC's headquarters in Vienna include Mexico, Bahrain, Oman and Kazakhstan. The United States, one of the world's major oil producers, is not involved in the discussions and won't be bound by any agreement.
Heading into the meeting, OPEC heavyweight Saudi Arabia said it was "100%" sure non-OPEC members would approve the extension of the cut.
"I see demand picking up strongly in the second half of the year and I see compliance greatly improving," Saudi Arabia's Energy Minister Khalid Al-Falih told reporters.
"And I see the length of this agreement as nine months sufficiently long to bring inventories down and to balance the market. So I'm very positive, very optimistic."
The current deal to support prices reduced production by 1.2 million barrels per day starting from Jan. 1 for six months, and will run into next year with the extension. Most of the cuts came from OPEC nations, who agreed to reduce 800,000 barrels per day, with the rest of the cuts coming from Russia and other non-OPEC countries, though not from the United States.
The cuts were aimed to put upward pressure on the price of oil and reduce oversupply.
Though tensions between the U.S. and Iran and attacks on tankers near the Strait of Hormuz have pushed up oil prices in recent days, there are concerns among members that over the longer term demand could weaken due to slower global growth. The International Energy Agency, a group of oil consuming countries, cut its demand estimate earlier this month.
The price of Brent crude, the international standard, dropped 0.3 percent Tuesday to $64.86 a barrel.