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OPEC and its allies on Sunday strike historic agreement

posted on Apr 12, 2020 03:13PM

to cut nearly 10 million barrels a day

The deal, sealed Sunday, came after President Trump intervened to help resolve a Saudi-Mexico standoff that jeopardized the broader pact

Saudi Arabia, Russia and the U.S. have agreed to lead a multinational coalition in major oil-production cuts after a month-long Saudi-Russian feud and a drop in demand due to the coronavirus crisis devastated oil prices. The deal, sealed Sunday, came after President Trump intervened to help resolve a Saudi-Mexico standoff that jeopardized the broader pact.

As part of the deal, 23 countries committed to collectively withhold 9.7 million barrels a day of oil from global markets. The unprecedented agreement is designed to address a mounting oil glut resulting from the pandemic’s erosion of oil demand.

On a hastily convened conference call Sunday with delegates from the 13-nation Organization of the Petroleum Exporting Countries and other nations including Russia, participants raced to strike a deal before oil markets opened on Monday. They expected oil prices to crash on Monday if no agreement had been clinched.

Trump and his representatives were not present at the meeting. Still, the American president’s presence loomed large. Trump had intervened with Saudi Arabia and Mexico and helped to settle the dispute.

Oil prices have lost 40% since early March, when Saudi Arabia and Russia failed to agree on an emergency plan to address an oil-market supply glut as the coronavirus outbreak spread. After the two nations split, Saudi Arabia embarked on an aggressive price war in an attempt to grab market share from Russia.

West Texas Intermediate crude for May delivery CLK20, 1.54% lost $2.33, or 9.3%, to settle at $22.76 a barrel on the New York Mercantile Exchange after trading as high as $28.36. The contract settled 6.2% higher on Wednesday.

June Brent crude BRNM20, +1.77% lost $1.36, or 4.1%, at $31.48 a barrel a barrel on ICE Futures Europe following an intraday peak of $36.40. The front-month international contract was 7.7% lower for the week.

Last week, Trump tweeted that he expects Saudi Arabia and Russia to cut oil production by 10 million barrels per day to as much as 15 million barrels a day.