Coronavirus COVID-19: OPEC+ oil producers, including Saudi Arabia, Russia, agree to cut output by 9.7 million barrels

A general view of Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia. (Reuters)

As the global energy markets bear the brunt of coronavirus COVID-19 pandemic, major oil producers led by Saudi Arabia and Russia on Sunday (April 12) reached an agreement to slash output by 9.7 million barrels a day.

This is easily the biggest oil deal in history and Russia and Saudi Arabia sealed the deal after three days of negotiations, two “virtual” meetings by video conference and a meeting of G20 energy ministers.

The compromise by OPEC+ — the alliance of OPEC members and non-OPEC producers — to accommodate Mexico, which was not ready to reduce output by 400,000 barrels a day. It was left to US President Donald Trump to intervene in this matter and ease through the special Mexico terms, under which the Mexican government will have to reduce output by much less than other OPEC+ members.  

President Trump thanked both Saudi King Salman and Russian President Vladimir Putin for a "great" deal. "The big Oil Deal with OPEC Plus is done," he said, adding, "This will save hundreds of thousands of energy jobs in the United States."

The big Oil Deal with OPEC Plus is done. This will save hundreds of thousands of energy jobs in the United States. I would like to thank and congratulate President Putin of Russia and King Salman of Saudi Arabia. I just spoke to them from the Oval Office. Great deal for all!

— Donald J. Trump (@realDonaldTrump) April 12, 2020

The meeting was chaired by Saudi Arabia’s energy minister Prince Abdulaziz bin Salman. Talking about the deal, Prince Salman said that the cuts would amount to 12.5 million barrels per day, because of higher output in April from Saudi Arabia, the UAE and Kuwait, reported Gulf news.

"I am honored to be a party of this historic moment and historic agreement," Prince Abdulaziz told Reuters.

For his part, UAE's energy minister Suhail Al-Mazrouei said his government is ready to reduce its oil production from the current level of 4.1 million barrels a day.

The agreement means that that the oil output will decrease by around 10 percent from May 1. Notably, the global demand for crude has come down by around 20 percent since the outbreak of coronavirus.

It is learnt that Saudi Aramco will release its “official selling prices” for crude in May on Tuesday. As part of the deal Aramco - Saudi's biggest oil producer - has agreed to cut output by 23 percent and it is expected that the company could for more reductions in the future.

Referring to the deal, Kremlin spokesman Dmitry Peskov said: “The whole world needs it. That’s because the global economy will be on the brink of uncontrolled chaos in prices, on energy supplies, unless there is such a deal.”