Some members of the Organization of Petroleum Exporting Country (OPEC) and Saudi Arabia are considering extending the historic production cuts of almost 10 million barrels per day beyond June.
They are weighing the possibility of continuing with the current level of OPEC+ production cuts till the end of the year in order to support the oil market; however, they are yet to get the support of Russia.
Russia could be a stumbling block to sustaining the output cut deal beyond June, though OPEC+ and top oil-producing countries had pledged in April to restrict production to 9.7 million barrels per day in May and June, and then 7.7 million barrels from July to December.
According to reports, Saudi Arabia is pushing for the deeper 9.7 million barrel per day output cut to be extended beyond June up to the end of 2020, in order to rebalance the oil market, which is still bedeviled by a lot of uncertainty and volatility.
Russia on its part, which is a key ally to OPEC has been non-committal on this plan. The Russian government on Tuesday approved a plan to increase oil production as soon as the OPEC+ deal ends. This they hope to achieve by having new oil wells drilled this year and in 2021 for 2022 production.
According to a report from oilprice.com, Saudi Arabia believes the oil market still needs support and wants to continue with the current output cut until the end of the year. Russia wants the same, but the major challenge is with the oil companies who had failed to reach an agreement at their meeting on Tuesday.
About half of the Russian oil firms support the extension of the current output cut while the other half are against the extension but rather calling for the continuation of output cut that was earlier agreed by OPEC+. As a result, Russia is typically non-committal and would wait to see how much oil demand will recover.