Russia has agreed with Saudi Arabia to extend by six to nine months a deal with Opec on reducing oil output, Russian President Vladimir Putin said, as oil prices come under renewed pressure from rising US supplies and a slowing global economy.
Putin, speaking after talks with Saudi Crown Prince Mohammed bin Salman, told a news conference the deal - which is currently due to expire on Sunday - would be extended in its current form and with the same volumes.
The Organization of Petroleum Exporting Countries, Russia and other producers, an alliance known as Opec+, meet on July 1-2 to discuss the deal that involves curbing oil output by 1.2 million barrels per day (bpd).
The United States, the world’s largest oil producer ahead of Russia and Saudi Arabia, is not participating in the pact.
“We will support the extension, both Russia and Saudi Arabia. As far as the length of the extension is concerned, we have yet to decide whether it will be six or nine months. Maybe it will be nine months,” said Putin, who met the crown prince on the sidelines of a G20 summit in Japan.
A nine-month extension would mean the deal runs out in March 2020. Russia’s consent means the Opec+ group may have a smooth meeting if Opec’s third-largest producer Iran also endorses the arrangement.
New U.S. sanctions on Iran have reduced its exports to a trickle as Washington seeks to change what it calls a “corrupt” regime in Tehran. Iran has denounced the sanctions as illegal and says the White House is run by “mentally retarded” people.
Kirill Dmitriev, the chief executive of Russian Direct Investment Fund who helped design the Opec-Russia deal, said the pact in place since 2017 has already lifted Russian budget revenues by more than 7 trillion roubles ($110 billion).
“The strategic partnership within Opec+ has led to the stabilisation of oil markets and allows both to reduce and increase production depending on the market demand conditions, which contributes to the predictability and growth of investments in the industry,” Dmitriev said.
Benchmark Brent has climbed more than 25 percent since the start of the 2019. But prices could stall as a slowing global economy squeezes demand and US crude floods the market, a Reuters poll of analysts found.
Saudi Energy Minister Khalid al-Falih said the new deal would help reduce global oil stocks, balance the market and spur investments in future energy supplies.
“The agreement confirms that the Saudi-Russian partnership paved the way to guarantee the interest of producers and consumers and the continued growth of the global economy,” Falih tweeted.