OPEC still believes that global demand for oil will decline
In April, OPEC + agreed to cut supply volumes by 9.7 mbpd, or almost 10 percent of the world volume. Initially, countries planned to cut back to 7.7 million barrels per day or about 8 per cent by the end of the year.
Delegates have been discussing extending the cuts for up to three months in recent days, but Moscow has insisted on starting the cuts faster, fearing that a too rapid recovery in oil prices would increase US shale oil production.
Saudi Arabia will no longer exceed its reduction plan over and above this month as demand for oil recovers and economies emerge from quarantine. In March and April, global demand fell by a third as travel bans and restrictions on movement affect consumption.
Mexico, which has resisted the deal since the beginning, will not participate in this last round of cuts, so from next month the total production decline will be reduced to 9.6 mmbpd.
Washington will be happy with the new deal. U.S. President Donald Trump called on Saudi Arabia and Russia to reach an agreement in April as the drop in prices has brought the oil shale industry in the United States to its knees.
On Friday Trump thanked Russia and Saudi Arabia for their help in saving the U.S. energy industry, which, he said, could become "useless".
U.S. oil production is expected to decline this year, but most of the wells that were shut down after the April decline in prices for the U.S. benchmark to negative territory are gradually resuming operations. This will slow down the price recovery.
Global oil consumption is gradually growing as restrictions in North America and Europe are easing, and in China, the world's second largest oil consumer after the US, domestic demand is almost back to pre-crisis levels.
Saudi Arabia, OPEC's largest producer, will now rely on OPEC members such as Nigeria and Iraq, which have not fully met their reduction commitments.
Prince Abdulaziz bin Salman, Saudi Arabian oil minister and son of the king, said earlier Saturday: "We have reason to be cautious optimistic. But we have not yet achieved our goal. It is imperative that we respect the agreements".
Nigeria's Minister of State for Petroleum Resources, Timipre Silva, tweeted ahead of the Saturday meeting that the country would compensate for higher production levels in the country later this year.
Bjornar Tonhaugen of Rystad Energy said the extension of the agreement would help reduce excess oil reserves in July by 3 million barrels per day more than if the group began to roll back the restrictions, or about 10 percent of the nearly 1 billion production seen in the first five months of the year.