Saudi Arabia and Russia typically take the lead in setting global production goals. But President Trump, facing a re-election campaign, a plunging economy and American oil companies struggling with collapsing prices, took the unusual step of getting involved after the two countries entered a price war a month ago. Mr. Trump had made an agreement a key priority.
It was unclear, however, whether the cuts would be enough to bolster petroleum prices. Before the coronavirus crisis, 100 million barrels of oil each day fueled global commerce, but demand is now down about 35 percent. While the cuts agreed to on Sunday were significant, they still fall far short of what is needed to bring oil production in line with demand.
The plan by OPEC, Russia and other allied producers in a group known as OPEC Plus will slash production by 9.7 million barrels a day in May and June, or close to 10 percent of the world’s output.
Analysts expect oil prices, which soared above $100 a barrel only six years ago, to remain below $40 for the foreseeable future. The American oil benchmark price was just over $23 a barrel on Sunday night.
“This is at least a temporary relief for the energy industry and for the global economy,” said Per Magnus Nysveen, head of analysis for Rystad Energy, a Norwegian consultancy. “The industry is too big to be let to fail.”
On Monday oil markets cheered the prospect of production cuts. Futures for West Texas Intermediate, the U.S. oil price benchmark, were up more than 4 percent to about $24 a barrel. Futures for Brent crude rose by a similar amount, to about $33 a barrel.
The New York Times
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