OPEC+ Extends 9.7million bpd Production Cuts to July Ending

• OPEC+ Extends 9.7million bpd Production Cuts to July Ending

OPEC and allies, known as OPEC Plus, have finally agreed to extend the 9.7 million barrels per day (mbpd) production cuts accord reached in April to the end of July, according to a Bloomberg report.

In the virtual conference held on Saturday, the delegates said members have agreed to extend the 9.7 mbpd deal to the end of July, instead of reducing it to 7.7 million bpd widely projected by experts.

The meetings draft communique, however, shows that member states that failed to attain 100 percent compliance in May and June will make extra reductions from July to September to compensate for their shortfalls.

“Despite the progress achieved to date, we cannot afford to rest on our laurels,” Mohamed Arkab, Algeria’s energy minister and current OPEC president, said at the start of the meeting. “The challenge that we face remains daunting.”

This agreement is expected to further bolster global oil prices and reduce supplies weighing on market outlook.

“Everyone saves face with this agreement,” Jan Stuart, global energy economist at Cornerstone Macro LLC, said on Friday after a tentative deal was in place. “But it begs the question: What is the enforcement mechanism? I’m very curious to see how the organization is going to elicit greater compliance from the cheaters.”

Experts are now projecting market recovery and an increase in demand for crude oil, especially with economies reopening for business after a long global lockdown brought about by COVID-19 pandemic.

“The oil market is on its way to recovery. Supply has shifted dramatically already,” said Ann-Louise Hittle, oil analyst at consultant Wood Mackenzie Ltd. “At the same time, global demand is recovering with both May and June climbing from the low seen in April as the coronavirus-related shutdowns continue to ease.”