A 3D printed oil pump jack is seen in front of displayed stock graph and Opec logo in this illustration picture, April 14, 2020. (REUTERS)
OPEC and its allies led by Russia will meet on Saturday to discuss extending record oil production cuts and to approve a new approach that aims to force laggards such as Iraq and Nigeria to comply better with the existing curbs.
The producers known as OPEC+ previously agreed to cut supply by 9.7 million barrels per day (bpd) during May and June to prop up prices which collapsed due to the coronavirus crisis. Cuts have been due to taper to 7.7 million bpd from July to December.
Two OPEC+ sources said Saudi Arabia and Russia had agreed to extend the deeper cuts until the end of July but said Riyadh was also pushing to extend them until the end of August.
Benchmark Brent crude, which slumped below $20 a barrel in April, was up about 3% on Friday to trade at a three-month high above $41. Prices had slipped from recent highs earlier in the week on uncertainty about when OPEC+ would meet.
Saturday's video conferences would start with talks between members of the Organization of the Petroleum Exporting Countries at 1200 GMT and would be followed by a gathering of the OPEC+ group at 1400 GMT, two OPEC+ sources said.
Three OPEC sources said an extension to cuts was contingent on high compliance. They said countries that produced above quota in May and June must promise to adhere to targets and agree to compensate for any earlier overproduction by cutting more in July, August and September.
The energy minister of the United Arab Emirates, Suhail Al Mazrouei, called for improved compliance in a letter sent to OPEC+ and seen by Reuters.
"As a representative of the UAE, I find it disappointing and unacceptable that some of the largest producers with capacity like (Saudi Arabia) and Russia comply 100% or more while other major producers do less than 50%," he wrote.
Iraq, which had one of the worst compliance rates in May according to a Reuters survey of OPEC production, agreed to the additional pledge, OPEC sources said.
"The Saudis have been pushing Baghdad hard to comply," one OPEC+ source said. "Iraq has agreed to the pledge to improve its full compliance with the cuts."
Baghdad blamed technical reasons and a recent change in its government for weak compliance in May, another OPEC source said.
The OPEC+ technical and ministerial committee meetings, which review the market and usually make recommendations on policy, were now scheduled for June 17 and 18, OPEC+ sources said.