OPEC, oil producers agree to 'unprecedented' output cut

DUBAI/LONDON

OPEC, Russia and other oil-producing nations on Sunday finalized an unprecedented production cut of nearly 10 million barrels, or a tenth of global supply, in hopes of boosting prices amid the coronavirus pandemic.

The Saudi energy minister said that effective oil supply cuts by OPEC and its allies, known as OPEC+, will amount to 12.5 million barrels per day, because of higher output in April from Saudi Arabia, the United Arab Emirates and Kuwait.

Prince Abdulaziz bin Salman spoke to Reuters by telephone on Sunday after OPEC and allies agreed to cut oil output by a record amount to support oil prices amid the coronavirus pandemic. Sources said effective global cuts including countries from outside the oil producers' alliance could amount to as much as 20%.

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

The kingdom pumped 12.3 million bpd in April, which is higher than its agreed reference level of 11 million bpd under the new pact, meaning the effective cut by Saudi Arabia is about 3.8 million bpd.

Video aired by the Saudi-owned satellite channel Al-Arabiya showed the moment that Saudi energy minister assented to the deal.

“I go with the consent, so I agree,” the prince said, drawing a round of applause from those on the video conference call.

The United Arab Emirates energy minister Suhail Al Mazrouei said in a tweet Sunday his country is committed to reducing oil production from its current level of 4.1 million barrels per day (MBOPD),

"In line with the OPEC+ agreement, the UAE is committed to reducing production from its current production level of 4.1 mbopd," Al Mazrouei tweeted.

“The big Oil Deal with OPEC Plus is done. This will save hundreds of thousands of energy jobs in the United States," US President Donald Trump said in a tweet. “I would like to thank and congratulate President Putin of Russia and King Salman of Saudi Arabia."

Russian President Vladimir Putin and US President Donald Trump hailed the new OPEC-plus oil deal as they stressed the “great importance of an agreement in the ‘OPEC-plus’ format, during a phone conversation, said a statement from the Kremlin.

Putin, Trump and Saudi Arabia’s King Salman, also held a joint phone call, the statement added.

Mexico was allowed to cut only 100,000 barrels a month, a sticking point for an accord initially reached Friday after a marathon video conference between 23 nations.

Mexico's energy minister said on Twitter that the group of nations agreed to cut 9.7 million barrels a day to begin May 1. Energy officials from other countries shared similar

Iran’s Oil Ministry confirmed the 9.7 million cut for May and June. It said the so-called OPEC+ countries agree to have Mexico reduce its output by 100,000 barrels only for those two months.

Nigeria’s Petroleum Resources Ministry said in a statement that the other cuts would stand in the deal, meaning an 8 million barrel per day cut from July through the end of the year and a 6 million barrel cut for 16 months beginning in 2021.

“This will enable the rebalancing of the oil markets and the expected rebound of prices by $15 per barrel in the short term,” the ministry said in a statement.

Mexico had initially blocked the deal but its president, Andrés Manuel Lopez Obrador, had said Friday that he had agreed with U.S. President Donald Trump that the US will compensate what Mexico cannot add to the proposed cuts.

Analysts offered cautious praise for the deal.

“The pure size of the cut is unprecedented, but, then again, so is the impact the coronavirus is having on demand,” said Mohammed Ghulam, an energy analyst at Raymond James.

Others worried it may not be enough.

“This is at least a temporary relief for the energy industry and for the global economy. This industry is too big to be let to fail and the alliance showed responsibility with this agreement,” said Per Magnus Nysveen, the head of analysis at Rystad Energy. “Even though the production cuts are smaller than what the market needed and only postpone the stock building constraints problem, the worst is for now avoided.” - Agencies