The talks almost fell apart because of resistance from Mexico, but came back from the brink after a weekend of urgent diplomacy — with the clock ticking down to the market open
The world’s top oil producers pulled off a historic deal to cut global crude output and put an end to a devastating price war.
After a week-long marathon of bilateral talks and four days of video conferences with government ministers from around the world, an agreement finally emerged to tackle the impact of the global pandemic on demand.
The talks almost fell apart because of resistance from Mexico, but came back from the brink after a weekend of urgent diplomacy — with the clock ticking down to the market open.
Opec+ will cut 9.7 million barrels a day — just below the initial plan of 10 million. This comprises around 10 per cent of the global supply. Mexico appeared to have won a diplomatic victory as it will only be required to cut 100,000 barrels — less than its pro-rated share.
With the virus paralysing air and ground travel, demand for gasoline is collapsing and crude prices have plunged to 18-year lows. That threatened the future of the US shale industry and the stability of oil-dependent states, while piling more challenges onto central banks fighting the fallout from the pandemic.
The question now for the oil market is whether the cuts will be enough to throw a floor under prices as demand for energy craters. With countries around the world extending their lockdowns, the death toll mounting in New York, and unemployment exploding in the US, the oil market is far more worried about consumption than supply.