Crude price surge as top oil producers agree historic cuts

LONDON: Global crude prices went soaring on Monday as oil-producing countries agreed on historic output cuts to prop up prices hammered by the coronavirus crisis and a Russia-Saudi price war

The US benchmark WTI climbed 7.7 percent to $24.52 a barrel in early Asian trade while Brent was up five percent at $33.08 per barrel.

OPEC producers dominated by Saudi Arabia and allies led by Russia thrashed out a compromise deal via video conference on Sunday, agreeing to a cut of 9.7 million barrels per day from May, down slightly from 10 million barrels a day envisioned earlier.

OPEC Secretary-General Mohammad Barkindo called the cuts historic. “They are largest in volume and the longest in duration, as they are planned to last for two years,” he said, adding that the deal “paved the way for a global alliance with the participation of the G20”.

The agreement between the Organisation of the Petroleum Exporting Countries (OPEC) and partners foresees deep output cuts in May and June followed by a gradual reduction in cuts until April 2022.

Saudi Energy Minister Prince Abdulaziz bin Salman, who chaired the meeting together with his Russian and Algerian counterparts, also confirmed that the discussions ended with consensus.

US President Donald Trump welcomed a “great deal for all”, saying it would save hundreds of thousands of energy jobs in the United States. He thanked Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman, both of whom he had spoken to. The Kremlin confirmed the joint phone call, adding that Putin and Trump agreed on the “great importance” of the deal.

Oil prices have slumped since the beginning of the year due to the COVID-19 pandemic that has sapped demand as countries around the world have put their populations under lockdown.

Russia and Saudi Arabia had engaged in a price war compounding the problem and ramping up output in a bid to hold on to market share and undercut US shale producers. Top oil producers struggled to finalise production cuts during a virtual summit held by G20 energy ministers on Friday, despite Trump’s mediation efforts to end the standoff with Mexico.