Saudi Arabia and Russia have agreed a preliminary deal to extend existing record oil output cuts by one month while raising pressure on countries with poor compliance to deepen their cuts.
OPEC+ sources told Reuters that “any agreement on extending the cuts is conditional on countries who have not fully complied in May deepening their cuts in upcoming months to offset their overproduction.”
OPEC+ agreed to cut output by a record 9.7 million barrels per day, or about 10 percent of global output, in May and June to lift prices battered by plunging demand linked to lockdown measures aimed at stopping the spread of the coronavirus.
Rather than easing output cuts in July, the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, were discussing keeping those cuts beyond June.
“Saudi Arabia and Russia are aligned on the extension for one month,” one OPEC source said.
The group also considered holding an online meeting on Thursday to discuss output policy, after Algeria, which holds the presidency of OPEC, proposed bringing forward a meeting planned for June 9-10.
The OPEC source said that an earlier meeting on Thursday also conditional on compliance and that the discussions now are about implementing criteria for those countries who have not fully complied with the oil cuts and how they can compensate for their overproduction in the coming months.
"We trust that other major oil producers will not revert to policies that impede an orderly and swift recovery from these unprecedented global economic conditions," a senior US administration official told Reuters in response to a question about the administration's approach to global oil producers ahead of the OPEC+ meeting.
OPEC members Iraq and Nigeria have shown weak compliance with their output reduction targets in May.
Kazakhstan also failed to fully meet its obligations under the OPEC+ oil cut pact, sources said.
Two sources also told Reuters that Gulf OPEC producers Saudi Arabia, Kuwait and the United Arab Emirates are not discussing extending their deeper voluntary oil cuts of 1.180 million bpd beyond June.