Russia and nine other non-OPEC producers agreed to a nine-month rollover of oil supply cuts on Tuesday, ratifying a policy designed to prop up crude prices amid a weakening global economy.
It comes less than 24 hours after energy ministers from the world's most powerful oil-producing nations thrashed out a deal to restrict the amount of crude flowing into the global market.
OPEC reached a deal to extend production cuts until March 2020 on Monday. The Middle East-dominated producer group was able to overcome their differences after five hours of negotiating in Vienna.
In a statement released Tuesday, the energy alliance said it had made the decision to prolong production cuts "in view of the underlying large uncertainties and its potential implications on the global oil market."
International benchmark Brent crude traded at $64.48 Tuesday afternoon, down around 0.8%, while U.S. West Texas Intermediate (WTI) stood at $58.55, almost 1% lower.
Increase is still possible
Speaking to CNBC's Dan Murphy in Vienna, Russian Energy Minister Alexander Novak said the agreement was about preventing major volatility in the market and preserving an "albeit unsteady situation."
"I think it is right not to make any sudden movements now and maintain the situation as it is," Novak told CNBC. "What is important is that we have agreed to monitor the situation. If there are any drastic deviations, then we can swiftly get together and decide on what to do," he added.
Novak iterated that if producers observed a deficit in the market in the future, then they could look at increasing production.
Onus on producers
Meanwhile, OPEC Secretary General Mohammad Barkindo said the onus now fell to oil producers to raise their levels of conformity. Speaking to CNBC's Dan Murphy after the agreement was reached with OPEC's allies Tuesday, he said the nine-month extension would take care of the seasonality factors that would likely come in the first quarter of next year.
"All in all, we look forward to a second half of the year with the market gradually but steadily moving into balance," he said.
The energy alliance between OPEC and non-OPEC partners, sometimes referred to as OPEC+, has been reducing oil output since 2017.
The policy is designed to prevent prices from sliding amid soaring production from the U.S. — which has become the world's top producer ahead of Russia and Saudi Arabia. The cuts are running at a volume of about 1.2 million barrels per day.
The U.S. is not a member of OPEC, nor is it participating in the supply pact. Washington has demanded Riyadh pump more oil to compensate for lower exports from Iran after slapping fresh sanctions on Tehran over its nuclear program. However, the U.S. has also ratcheted up its oil production in recent years.
President Donald Trump is likely to be irritated by an extended period of OPEC-led supply cuts, after repeatedly calling on Saudi Arabia to supply more oil and help reduce prices at the pump.
Brent crude has climbed more than 25% so far this year, after the White House tightened economic sanctions against OPEC members Iran and Venezuela, slashing their exports.
