OPEC and Non OPEC Oil Producers Hold Ministerial Meeting to Agree to Extend Oil Production Reduction Agreement

The Organization of the Petroleum Exporting Countries (OPEC) issued a statement on June 6th stating that OPEC has reached a consensus with non OPEC oil producing countries to extend the first phase of the previously signed production reduction agreement by one month until the end of July. Analysis suggests that if relevant oil producing countries comply with production reduction agreements, international oil prices may receive more support. However, due to multiple factors, the outlook for the crude oil market is still not optimistic.

OPEC and non OPEC oil producing countries held a ministerial meeting via video on the 6th. After the meeting, a statement was issued emphasizing that OPEC and non OPEC oil producing countries unanimously agreed to extend the daily reduction of 9.7 million barrels of crude oil production until the end of July; Countries that failed to achieve 100% of their production reduction quotas in May and June will receive additional production cuts from July to September as compensation. The statement states that in order to ensure fairness, timeliness, and impartiality in the implementation of production cuts, the Joint Ministerial Supervisory Committee of OPEC and non OPEC oil producing countries will closely monitor the world energy market, oil production levels, and so on. The committee meeting will be held once a month until December 2020. The statement also announced that a ministerial meeting between OPEC and non OPEC oil producing countries would be held in Vienna, Austria in December 2020, and called on all major oil producing countries to comply with the agreement and fulfill their production reduction commitments.
In April this year, OPEC and non OPEC oil producing countries reached an agreement to reduce production, effectively curbing the trend of significant decline in international oil prices. The price of West Texas light crude oil in the United States rose by approximately 88% in May, marking the largest monthly increase since records began in 1983; London Brent crude oil prices rose nearly 40% in May, marking the largest monthly increase since 1999.
The Saudi Economic Daily analyzed that the agreement reached by all parties this time will help further stabilize the international crude oil market and oil prices. The Egyptian News reported that many representatives from participating countries emphasized that extending the production reduction agreement would help the crude oil market become more stable and balanced. Countries such as Iraq, which are facing difficulties in implementing production reduction agreements, have also stated that they will fulfill their commitments, and these signals are conducive to the stability of the international crude oil market.
As economic activities in various countries gradually recover and demand accelerates, the supply and demand of the international crude oil market gradually returns to balance. The latest monthly report released by the International Energy Agency believes that the development prospects of the international crude oil market have improved to a certain extent. Reuters reported that according to the current reduction in production and economic recovery rate of major oil producing countries, crude oil will be in short supply in July, but OPEC still has about 1 billion barrels of stock to be consumed.
However, the recovery of the crude oil market is difficult to be smooth sailing. The geopolitical risks in the Middle East remain, international crude oil inventories remain large, and economic recovery and the recovery of travel consumption habits will take time. The rotating chairman of OPEC and Algerian Minister of Oil, Akab, stated that after July, global crude oil inventories will increase to 1.5 billion barrels, and the challenges faced by oil producing countries remain significant.