After failing to follow recent agreements, Iraq and Nigeria compromised to extend oil-production cuts as compensation, and OPEC extended their record oil-production cuts through July, according to the Wall Street Journal.
The deal has yet to be ratified by a Russia-led group of non-OPEC allies, but Moscow’s actions point to it already being behind the deal. The Organization of the Petroleum Exporting Countries is composed of 23 nations. Through the leadership of Russia and Saudia Arabia, the OPEC agreed in April on a cut output of 9.7 million barrels a day.
Mohamed Arkab, Algeria’s oil minister and OPEC’s rotating president, said, “We cannot afford to rest on our laurels.” Saudia Arabia has agreed to further cuts to compensate for countries that claim they are unable to take part, such as Mexico. Now, Nigeria and Iraq are also contributing to the same effort.
On Saturday, Mexico’s President Andrés Manuel López Obrador said, “We aren’t able to adjust our production more, we have already closed oil wells to make good out of the commitment we made.”
The OPEC deal, in addition to a promising May U.S. jobs report, led to increased oil prices on Friday, with Brent crude futures reaching $42.30 a barrel, a 5.8 percent increase. The gains bring prices to the highest they’ve been since early March.
Head of oil markets at consulting firm Rystad Energy, Bjornar Tonhaugen said, “The market has mostly priced this one-month extension scenario in. So the upside to flat price is fairly limited if OPEC Plus doesn’t have additional cards up its sleeve.”