TOKYO: Oil prices rises as 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 Organisation 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”.
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.”
This is good. We welcome any news that brings stability to global oil markets.
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.
Russian Energy Minister Alexander Novak was quoted by Russian news agency TASS as saying he did not expect oil markets to recover before “end of the year, in the best case”.
Harry Tchilinguirian of BNP Paribas said “a sustained recovery” in the oil price was not expected “until pent-up demand is released in Q3 on the lifting of confinement and social distancing measures related to COVID-19”.
Read more: OPEC Production Cut Papers Over Cracks In US-Gulf Relation But For How Long?
