OPEC+ agreed Sunday to a report cut in output to pare oil prices during the coronavirus pandemic in an unprecedented deal with other oil countries, along with the U.S., that might curb global oil supply by 20%.
Measures to hold the spread of COVID-19 have destroyed demand for fuel and pushed down oil prices, straining budgets of oil producers, and hammering the U.S. shale industry, which is more susceptible to low prices resulting from its higher costs.
OPEC+ stated it had agreed to cut output by 9.7 million barrels per day (BPD) for May and June, after four days of discussions and following pressure from U.S. President Donald Trump to arrest the price decline.
OPEC+ sources said they anticipated total global oil cuts to amount to over 20 million BPD, or 20% of global supply, effective May 1. OPEC had an identical figure in its draft assertion; however, it eliminated it from the final model.
The biggest oil cut ever is over four times severe than the previous record cut back in 2008. Producers will slowly ease curbs after June, although cuts in output will stay in place until April 2022.
Oil demand has plunged by around a third due to the coronavirus pandemic. Oil prices leaped over $1 a barrel in Monday trading after the settlement; however, gains have been capped amid concern that it would not be sufficient to head off a supply glut with the coronavirus pandemic hammering demand.