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.

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 about 1% to around US$32 a barrel in London after swinging wildly in the first few minutes of trading following the deal. The focus now shifts to 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.”

Output cuts

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.

Brent futures jumped 8% in the first seconds of trading on Monday in Asia before dropping more than 1% in a rapid reversal. By 8:13 a.m. in London they were up 0.8% again at $31.72 a barrel.

With the virus paralyzing air and ground travel, demand for gasoline, jet-fuel and diesel is collapsing. That threatened the future of the U.S. shale industry, the stability of oil-dependent states and squeezed the flow of petrodollars through an ailing global economy.

The U.S., Brazil and Canada will contribute another 3.7 million barrels on paper as their production declines and other G20 states will contribute 1.3 million. Still, the G20 numbers don’t represent real voluntary cuts, but rather reflect the impact that low prices have already had on output and would take months, perhaps more than a year, to come into effect.

“OPEC+ started the fire, and it was their responsibility to put it out,” Jason Kenney, the premier of Alberta, Canada’s biggest oil-producing province, said in a Twitter post. “Many challenging months ahead with very low demand and huge inventories, but at least now there is path to recovery.”

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.

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