- 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 that brought the energy industry to its knees.
- OPEC+ will cut 9.7 million barrels a day, just below the initial proposal of 10 million.
- Oil 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.
- Brent futures jumped 8% in the first seconds of trading on Monday in Asia before dropping more than 1% in a rapid reversal. But by 1:14 p.m. in Singapore they were up 4% again at $32.74 a barrel.
- The deal doesn’t take effect until May 1, leaving OPEC+ countries, which have significantly increased production over the last month, able to continue flooding the market for nearly another three weeks.
- The production restraints are set to last for about two years, though not at the same level as the initial two months. After June, the 10 million barrel cut will be tapered to 7.6 million a day until the end of the year, and then to 5.6 million through 2021 until April 2022.
- 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. US President Donald Trump intervened, helping broker the final compromise.
- Mexico won a diplomatic victory as it will only cut 100,000 barrels — less than its pro-rated share, having blocked the deal since the plan was first revealed on Thursday. Now its future inside OPEC+ is uncertain, as it’s expected to decide over the next two months whether to leave the alliance, delegates said.
- The biggest winner appears to be Trump, who refused to actively cut American oil production and personally brokered the deal over phone calls with Mexican President Andres Manuel Lopez Obrador, Russian President Vladimir Putin and King Salman of Saudi Arabia. Under the terms, Saudi Arabia will cut its production just a fraction under 8.5 million barrels a day, its lowest level since 2011.
- Goldman Sachs Group Inc. called the cuts “too little and too late,” saying they’d only lead to an actual reduction of about 4.3 million barrels a day from first quarter levels. “Ultimately, this simply reflects that no voluntary cuts could be large enough to offset the 19 million barrels a day average April-May demand loss due to the coronavirus,” the bank’s analysts wrote in a report.
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