As the global community continue to battle the dreaded Coronavirus (COVID-19) pandemic, which has crippled businesses globally, the Organisations of Petroleum Export Countries (OPEC), which met virtually yesterday said Saudi Arabia and Russia have finally agreed a deal on a deep output cut.
Reports by Reuters said that the cut amount to 10 million barrels per day (bpd) or 10 per cent of global supplies, with another five million bpd. The five million bpd according to the report is expected to come from other nations to help deal with the deepest oil crisis in decades. The deal would last for two years with the cuts implemented gradually.
Recall that the media had reported earlier on that there would be a virtual meeting, which started around 10:45 am ET, between OPEC and its allies, known as OPEC+. Some of the world’s largest producers were set to discuss historic production cuts as the Coronavirus pandemic saps demand for crude oil. Oil prices reversed course and turned negative as traders awaited confirmation of the cuts as well clarity on key details, including how the cuts would be divided among OPEC+, as well as the production numbers on which the cut would be based.
U.S. West Texas Intermediate fell 9.29 per cent, or $2.33, to settle at $22.76 per barrel. Earlier, the contract jumped more than 12 per cent to hit a session high of $28.36. International benchmark Brent crude slipped 4.14 per cent to settle at $31.48, after earlier hitting a high of $36.40. “Covid-19 is an unseen beast that seems to be impacting everything in its path,” OPEC Secretary General Mohammad Barkindo said at the meeting. “For the oil market, it has completely up-ended market supply and demand fundamentals since we last met on 6 March,” he added. U.S. President Donald Trump said, last week, that he had brokered a deal with Saudi Arabia and Russia could lead to cuts of 10 million to 15 million bpd.