BICOM

Russia and Saudi Arabia have agreed to extend an OPEC deal to reduce oil output for six to nine months.

Russian President Vladimir Putin, who met the Saudi Crown Prince on the side-lines of the G20 summit in Japan, said: “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.”

Saudi Energy Minister Khalid al-Falih said the deal would likely be extended by nine months and no deeper reductions were needed. Falih added: “I don’t think the market needs that. Demand is softening a little bit but I think it’s still healthy.”

OPEC will meet today and tomorrow in Vienna to discuss and endorse the deal, which involves curbing oil output by 1.2 million barrels per day. The group has been reducing oil output since 2017 to prevent prices from sliding amid a weakening global economy and soaring US shale oil output.

Kirill Dmitriev, chief executive of the Russian Direct Investment Fund who helped design the OPEC-Russia deal, said: “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.”

A nine-month extension would mean the deal runs out in March 2020. It remains uncertain if OPEC’s third-largest producer, Iran, also endorses the arrangement.

Iranian Oil Minister Bijan Zanganeh said he had no problem with output cuts agreed by OPEC members, but heavily criticised what he described as “unilateralism”. He said: “The members need to discuss and decide together. It hasn’t been OPEC’s norm that two people decide outside OPEC and then the organisation approves the decision. This is the biggest threat to OPEC.”

US sanctions on Iran have reduced its exports to a trickle and Washington has called for Saudi Arabia to pump more oil to compensate for lower exports from Iran.