Top oil producers on Sunday agreed to their largest-ever cuts in production in an effort to support crashing prices as the coronavirus pandemic continues to sap global demand of fuel. Oil prices soared promptly in early trade in Asian markets, rising over 5%.
The Organization of the Petroleum Exporting Countries, or OPEC, agreed to start with a cut of 9.7 million (97 lakh) barrels per day in output from May 1 to June 30, followed by gradual relaxation of the curbs until April 2022. This could reduce supply by almost 20%, Reuters reported, quoting sources in the organisation.
The compromise came two days after Mexico did not agree to a deal to cut output in May and June by 10 million (1 crore) barrels per day. Another video-conference of members and non-members, together called OPEC+, was held on Sunday led by Russia and Saudi Arabia.
The United States benchmark WTI crude oil climbed 7.7% to $24.52 a barrel in early Asian trade, while the Brent variety was up 5% at $33.08, AFP reported.
Mohammad Barkindo, the secretary general of OPEC, 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 deal “paved the way for a global alliance with the participation of the G20”, he added.
United States President Donald Trump, who had put pressure for such a deal, said it was “great for all”, and would “save hundreds of thousands of energy jobs” in his country. He thanked Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman.