Cranes tower over a tanker being converted into a Floating Production Storage Offloading Facility ... [+]
Topline: The world’s top oil producers, including the U.S., Russia and Saudi Arabia, came to an agreement to cut the production of oil on Sunday, ending an oil price war that saw the price of crude plummet amid a global economic crisis caused by the coronavirus pandemic.
- OPEC, the 14-nation organization in charge of regulating world oil production, and its allies agreed to cut production by 9.7 million barrels per day as the coronavirus outbreak has caused demand for oil to plunge, as Bloomberg first reported.
- The agreement, which comes after multiple back-and-forth emergency meetings among world’s biggest oil players, puts an end to a price war that broke out between Russia and Saudi Arabia in March that exacerbated the oil price crisis.
- Under the agreement, Mexico, which had threatened to kill the deal, cut oil production by 100,000 barrels per day, instead of the 400,000 per day cut that was initially on the table; on Friday, President Trump said the U.S. would cut production, too, in an effort to aid Mexico but did not explain how that would occur, adding that the country would eventually have to pay back its debt to the U.S.
- “We’d make up the difference,” Trump said at a White House briefing Friday, adding, “Now, the U.S. production has already been cut.”
- The U.S., under the deal agreed to on Sunday, pledged to balance Mexico’s cut in production by reducing its output by 300,000 barrels, according to the Wall Street Journal.
- The cut to oil production will begin on May 1 and last through the end of June.
News peg: The nations expected oil prices to crash on Monday if no deal was reached, reports the Wall Street Journal.
What we don’t know: Whether the cut is large enough to stabilize the oil market. Chris Midgely, S&P Global Platts’ global head of analytics, told CNBC that the cut in oil production isn’t enough “to bring sustainable, restorative support to oil prices, not unless OPEC goes further.”
It’s also not totally clear how the U.S. cuts will be carried out.
Crucial quote: Trump tweeted about the deal on Sunday:
