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Members of the Organization of the Petroleum Exporting Countries (OPEC) have agreed to extend their oil production cuts to support oil prices against a backdrop of weakening global demand and increasing US shale oil production.
The 14-member group, led by de facto leader Saudi Arabia, also includes Kuwait and the UAE. The group met in Vienna where they agreed to extend their supply reductions by another nine months until March 2020. The deal is now subject to approval by non-OPEC members including Russia.
OPEC and its allies are currently cutting production by 1.2 million barrels per day. While prices have been propped up by these efforts, OPEC’s share of the global oil market has been reduced to the lowest since 1991.
US-China trade tensions, weaker than expected demand from top consumers China and India, and rising production levels of US shale oil have pressured oil prices in recent times.
While subdued oil prices have strained the economies of OPEC nations, revenue diversification efforts in countries including Saudi Arabia, Kuwait and UAE are helping reduce the Gulf countries’ dependence on oil. However, any resurgence in oil prices as a result of OPEC’s efforts is likely to further support members’ economies.
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