OPEC and allies led by Russia agreed to a record cut in output to prop up oil prices amid the coronavirus pandemic in an unprecedented deal with fellow oil nations, including the United States, that could curb global oil supply by 20 percent.
Measures to slow the spread of the coronavirus have destroyed demand for fuel and driven down oil prices, straining budgets of oil producers and hammering the U.S. shale industry, which is more vulnerable to low prices due to its higher costs.
The group, known as OPEC+, said it had agreed to reduce output by 9.7 million barrels per day for May and June, after four days of talks and following pressure from U.S. President Donald Trump to arrest the price decline.
The biggest oil cut ever is more than four times deeper than the previous record cut in 2008. Producers will slowly relax curbs after June, although reductions in production will stay in place until April 2022.
In a statement from the White House, Trump welcomed the commitment by Saudi Arabia and Russia “to return oil production to levels consistent with global energy and financial market stability.”
Earlier on Twitter, Trump wrote: “The big Oil Deal with OPEC+ is done. This will save hundreds of thousands of energy jobs in the United States.” Thanking Russian President Vladimir Putin and Saudi King Salman for pushing the deal through, Trump added: “I just spoke to them... Great deal for all,”
Total global cuts will include contributions from non-members, steeper voluntary cuts by some OPEC+ members and strategic stocks purchases by the world’s largest consumers.
Three OPEC+ sources said non-members Brazil, Canada, Norway and the United States would contribute 4 million to 5 million barrels per day.
Trump had threatened OPEC leader Saudi Arabia with oil tariffs and other measures if it did not fix the market’s oversupply problem as low prices have put the U.S. oil industry, the world’s largest, in severe distress.
Canada and Norway had signalled a willingness to cut and the United States, where legislation makes it hard to act in tandem with cartels such as OPEC, said its output would fall steeply by itself this year because of low prices.
