Opec and Russia near pact to begin unwinding historic supply cuts

Opec and Russia are primed to agree a deal to begin unwinding record oil supply cuts as countries seek to manage a rebound in demand and the long-lasting effects of coronavirus on the industry.

Reductions in output, which began in May, are expected to ease from 9.7m barrels a day to 7.7m b/d from August, Opec delegates said ahead of Wednesday’s virtual meeting of the oil cartel and allied oil producers.

Abdulaziz bin Salman, Saudi Arabia’s oil minister, said in opening remarks that easing of production cuts may be narrower than targeted as countries that did not meet the previously-agreed curbs catch up. This implies the cuts will stand around 8.5m b/d if countries such as Iraq and Nigeria do not release as many barrels on to the market as they may have otherwise.

Saudi Arabia, which this year launched a price war and flooded the market with its crude to punish rival producers, has since sought to emphasise that the move was a one-off departure from its strategy to manage the market.

Saudi Arabia is keen to keep the US on side. President Donald Trump — facing an election in November, an economic downturn and lobbying by shale oil executives struggling with low oil prices — backed the deal among global producers reached in April.

Russia’s energy minister Alexander Novak said on Wednesday oil nations are moving into the “second phase” of the cuts agreement, initially designed to help stabilise a market dealing with a collapse in demand by as much as a third from pre-crisis levels.