Top oil-producing countries agreed on “historic” output cuts to prop up prices hammered by the coronavirus crisis and a Russia-Saudi price war, sending crude prices soaring on Monday.
The US benchmark WTI climbed 7.7 per cent to $24.52 a barrel in early Asian trade while Brent was up 5.0 per cent at $33.08.
OPEC producers dominated by Saudi Arabia and allies led by Russia thrashed out a compromise deal via videoconference Sunday after Mexico had balked at an earlier agreement struck on Friday.
In the compromise reached Sunday they agreed to a cut of 9.7 million barrels per day from May, according to Mexican Energy Minister Rocio Nahle, down slightly from 10 million barrels a day envisioned earlier. OPEC Secretary General Mohammad Barkindo called the cuts “historic”.
“They are largest in volume and the longest in duration, as they are planned to last for two years,” he said. The agreement between the Vienna-based Organization of the Petroleum Exporting Countries and partners foresees deep output cuts in May and June followed by a gradual reduction in cuts until April 2022.
Barkindo added that the deal “paved the way for a global alliance with the participation of the G20”.
Saudi Energy Minister Prince Abdulaziz bin Salman, who chaired the meeting together with his Russian and Algerian counterparts, also confirmed that the discussions “ended with consensus”.
US President Donald Trump welcomed a “great deal for all”, saying on Twitter it would “save hundreds of thousands of energy jobs in the United States”.
He added he “would like to thank and congratulate” Russian President Vladimir Putin and Saudi Crown Prince and de facto leader Mohammed bin Salman, both of whom he had spoken to.
The Kremlin confirmed the joint phone call, adding that Putin and Trump agreed on the “great importance” of the deal.
“This is good,” Canadian Natural Resources Minister Seamus O’Regan tweeted. “We welcome any news that brings stability to global oil markets.” Initial reticence from Mexico to introduce output cuts had led to a standoff that cast doubt on efforts to bolster oil prices, pushed to near two-decade lows.
Oil prices have slumped since the beginning of the year due to the Covid-19 pandemic that has sapped demand as countries around the world have put their populations under lockdown.
Compounding the problem, key players Russia and Saudi Arabia had engaged in a price war, ramping up output in a bid to hold on to market share and undercut US shale producers.
