• Wednesday, April 24, 2024
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Oil Higher as Price War Ends With Historic Deal to Cut Output

Oil & Gas

The world’s top oil producers pulled off a historic deal to cut global petroleum output by nearly a 10th, putting an end to the devastating price war between Saudi Arabia and Russia.

After a week-long marathon of bilateral calls and video conferences of ministers from the OPEC+ alliance and the Group of 20 nations, an agreement finally emerged to tackle the impact of the pandemic on oil demand.

Prices rose more than 4% to almost $33 a barrel in London after swinging wildly in the first few minutes of trading following the deal.

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Investors are trying to establish whether the cut will be enough to dent the massive glut that keeps growing as the virus shuts down the global economy.

The talks had almost fallen apart late last week — amid resistance from Mexico — but came back from the brink after a weekend of urgent diplomacy. President Donald Trump intervened, helping broker the final compromise.

“Unprecedented measures for unprecedented times,” said Ed Morse, a veteran oil watcher who is head of commodities research at Citigroup Inc.

“Unprecedented in historical discussions of production cuts, the U.S. played a critical role in brokering between Saudi Arabia and Russia for the new OPEC+ accord.”

OPEC+ will cut 9.7 million barrels a day — just below the initial proposal of 10 million.

“We have demonstrated that OPEC+ is up and alive,” Saudi Energy Minister Prince Abdulaziz bin Salman told Bloomberg News in an interview minutes after the deal was done. “I’m more than happy with the deal.”

The accord caps a tumultuous month when Brent crude, the global benchmark, plunged to its lowest in nearly two decades, falling toward $20 a barrel. Earlier this year, it traded above $70 a barrel.

OPEC+ ministers had to race onto a video conference call on Easter Sunday, less than four hours before the oil market reopened, to close the deal.