Opec agrees to extend cuts for nine months amid demand concerns

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Russian Federation reduced oil production in June by more than the amount agreed in a global deal to cut output, the energy minister and industry sources said on Monday, as the sector still felt the impact of a contaminated crude crisis that crippled exports.

Giovanni Staunovo, oil analyst for UBS, told The Daily Telegraph: "We believe due to the [existing] Opec production cuts the market will be undersupplied in the second half".

"Fortunately, amendments were made to the OPEC and Non-OPEC Cooperation Charter, and decisions of this charter are not binding and will not create an obligation for the countries", Mr. Zangeneh said to reporters in Vienna following the 176th OPEC Meeting.

Speaking last week, the United States special envoy for Iran said Washington will sanction any country that imports Iranian oil, without exception.

The OPEC+ group had agreed to a six-month round of output cuts in December that lifted oil prices by as much as 22 per cent by April.

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"We have reached an agreement to extend [the deal] for nine months with the current production levels", Manuel Quevedo, Venezuela's oil minister, said at a press conference after OPEC talks.

Because the actual news of the OPEC+ deal extension was not surprising, it provided limited support to oil prices, van Cleef noted.

"Iran supports cooperation with non-OPEC states, but as long as some members of OPEC are hostile against other members, like Iran, OPEC's understandings with non-OPEC states are meaningless and there is no room for cooperation", Zanganeh said. Crude prices have jumped by a third since then, with global benchmarks going up almost two percent on Monday on expectations of the extension of the deal. "If it announced something in agreement with the rest of OPEC, this is most welcome", he said.

The slowing global economy and stronger U.S. dollar had further depressed the price of crude.

Opec will seek the backing of an alliance of large oil producers from outside the cartel, led by Russian Federation, at a separate meeting of the Opec+ group in the Austrian capital on Tuesday.

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The move to extend production cuts was reportedly supported by Iran, which is now at odds with Saudi Arabia over the recent attacks on two oil tankers in the Strait of Hormuz and the ongoing war in Yemen.

Oil price reaction was lukewarm with Brent trading at $65.41 at 10.50am UAE time, as markets cautiously assessed the implications of the extension for the near term.

"So far it has been successful, therefore, it's not expected that the oil price will increase significantly in the next six months".

The United States and China agreed at the G20 summit to restart trade talks, but factory activity shrank across much of Europe and Asia in June while USA manufacturing activity slowed to near a three-year low.

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