Yemisi Izuora
The Organization of Petroleum Exporting Countries, OPEC, along with 10 non-OPEC countries led by Russia on Tuesday decided to extend production cuts by nine months up to 31st March 2020.
The aim is to reduce global crude oil inventory levels and prop global crude oil prices.
“In view of the underlying large uncertainties and its potential implications on the global oil market, the 6th OPEC and non-OPEC Ministerial Meeting hereby decided to extend the decision taken on voluntary production adjustments at the 5th OPEC and non-OPEC Ministerial meeting on 7 December 2018, for an additional period of nine months from 1st July 2019 to 31st March 2020,” OPEC said in a official statement.
The decision from OPEC and non-OPEC members on continuing reduction in crude oil production follows projections made by International Energy Agency (IEA) and other leading forecasters on an expected slow-down in global economy, especially Asia, which is expected to reduce demand for crude oil.
“The was also observed that oil demand growth for 2019 has been revised down since the last meeting of the conference to now stand at 1.14 Million barrels a day (mb/d) and non-OPEC supply in 2019 is expected to grow at a robust pace of 2.14 mb/d, year-on-year,” OPEC said as part of its release.
Russian Energy Minister Alexander Novak told reporters at the forum the decision to extend production cuts through 2020 was primarily made in order to maintain stable global crude oil markets and avoid build-up of inventories, adding that level of cuts will be the same as before.
According to the deal, OPEC and non-OPEC members will cut continue to cut production by 1.2 million barrels per day, with the bulk of the cuts coming from OPEC nations, who had previously agreed to reduce production 800,000 barrels per day, with the rest of the cuts coming from Russia and other non-OPEC countries.
Oil markets of late have been on a constant edge due to intensifying tensions between US-Iran, trade war between US-China and global economic slow-down.