Saudi Arabia and Russia have reportedly agreed to extend production cuts by another month, providing support to oil prices — though a key roadblock to major gains remains in place.

OPEC sources told Reuters that the two leading oil producers had agreed to extend the cuts on the condition that countries that did not fully comply with the cuts in May would reduce their production accordingly to offset their overproduction.

OPEC, Russia and other major producers had agreed in April to cut crude oil production by 9.7 million barrels per day (MMbpd) for two months before easing cuts to 7.7MMbpd until the end of the year.

From January 2021, the cuts will be reduced to 5.8MMbpd until the end of April 2022.

The production cuts and China’s drive to revive its economy have provided a floor for oil prices, with the West Texas Intermediate crude slipping just 0.08 per cent to $US36.72 a barrel in late trade and up nearly 50 per cent from its close of $US24.56 a barrel just one month ago.

Likewise, the broader benchmark Brent crude dipped 0.33 per cent to $US39.45 a barrel, though this is still up 45 per cent from a month ago.

Further support could come from the US Energy Information Administration (EIA) which reported that US crude inventories had edged down by 2.1 million barrels for the week ended 29 May, upsetting expectations of an increase.

However, US shale oil producers are starting to bring back shut-in production, which could impede any major price gains.

Bloomberg reported that shut-in production at the major Bakken shale province stood at 475,000 barrels per day, a 7 per cent reduction from the week before.

Several major producers have already flagged that they are reopening the taps with EOG Resources saying it plans to “accelerate” production in the second half of 2020 while Parsley Energy aims to restart most of its shut-in output this month.

Further support for the prediction that oil is unlikely to break past the $US40 a barrel mark this year comes from the continued rise in gasoline and distillate stockpiles, according to the EIA.

Separately, Shell is reported to be considering the sale of 26 per cent of its interest in the facilities of the QGC liquefied natural gas project in Queensland.

Reuters says the supermajor is pitching the sale of minority stake in the facilities to institutional investors.

ASX small cap oil and gas news:

Buru Energy (ASX:BRU) has completed its crude offtake contract with Petro-Diamond Singapore and indicated that its next lifting of oil produced from its Ungani oil field in northern WA will be sold on a spot basis.

The company and its Chinese partner Roc Oil plan to continue selling Ungani crude on a spot basis while reviewing the potential to enter into another longer term offtake agreement.

Ungani currently produces about 1,250 barrels of oil per day with the joint venture planning a series of well optimisation activities.