Leaders from Russia and Saudi Arabia say the so-called OPEC+ group has agreed to extend by six to nine months a deal to reduce oil output in an effort to bolster global crude prices in the face of a potential economic slowdown.
Russian President Vladimir Putin, speaking on the sidelines of the Group of 20 summit in Japan, on June 29 said that "we will support the extension, both Russia and Saudi Arabia."
"As far as the length of the extension is concerned, we have yet to decide whether it will be six or nine months. Maybe it will be nine months," Putin said after meeting with Saudi Crown Prince Muhammad bin Salman in Osaka.
Saudi Energy Minister Khalid al-Falih later said the deal would most likely be extended by nine months and that no deeper output cuts than already agreed upon were needed.
"Demand is softening a little bit, but I think it’s still healthy," the Saudi minister said.
At the same time, Iran's crude exports have virtually stopped, taking off two million barrels per day from world supplies since early 2018. But the big producers see softening global demand and strong U.S. oil output as factors necessitating their production cuts.
The decision also means Russia and Saudi Arabia are not immediately concerned about a possible military conflict in the Persian Gulf, which would disrupt crude shipments to consumers.
The Organization of the Petroleum Exporting Countries, Russia, and other producers have come together in recent years to form an alliance known as OPEC+ to help stabilize prices on global markets, either cutting back when prices dip or hiking output when they rise too quickly.
The current agreement on output cuts of 1.2 million barrels a day was due to expire on June 30.
The group is set to meet on July 1-2 in Vienna to discuss the deal.
The United States, which is the world's largest producer of oil ahead of Russia and Saudi Arabia, does not participate in OPEC+.
Kirill Dmitriyev, chief executive of the Russian Direct Investment Fund, who helped design the OPEC-Russia deal, was quoted by Reuters as saying the partnership "has led to the stabilization of oil markets and allows both to reduce and increase production depending on the market demand conditions, which contributes to the predictability and growth of investments in the industry."
He also said the pact in place since 2017 had lifted Russian budget revenues by more than 7 trillion roubles ($110 billion).
The benchmark oil price, Brent crude, has increased more than 25 percent since the start of 2019.
But a Reuters poll of market analysts said prices could ease as the global economy slows and additional U.S. oil floods the market.
Saudi Minister Falih said that "the agreement confirms that the Saudi-Russian partnership paved the way to guarantee the interest of producers and consumers and the continued growth of the global economy."
Russia, although not an OPEC member, has recently been increasing its influence among the once-powerful cartel.