A historic agreement to cut oil production and put an end to the price war that is sinking crude oil prices. After a week of tight negotiations and four days of videoconferencing, an agreement between the major producing countries in the world emerged to deal with the impact of coronavirus on oil demand.
Opec + has committed itself, reports the Bloomberg agency, to cut the production of 9.7 million barrels per day, less than the 10 million initially expected but in any case the largest reduction in history. As part of the compromise reached, Mexico has achieved an important victory: it will reduce its production by 100,000 barrels per day, much less than what was asked at the beginning. According to rumors, Mexico will reevaluate its position two months after the entry into force of the agreement. The United States, Brazil and Canada will contribute an overall cut of 3.7 million barrels. The agreement was reached thanks also to the mediation of Donald Trump who, to facilitate an agreement, put on the plate the possibility of counting the cut in US production as a reduction in Mexico.
A hypothesis initially rejected by Saudi Arabia which, under strong pressure, would then accept the offer in the knowledge that the lack of an agreement could have pushed oil prices down even further. Crude oil prices, already falling due to excessive capacity, were sunk by coronavirus, which reduced oil demand by a third. Just Saudi Arabia together with Russia is the country called to the major reduction.
The question is now whether the oil market will be satisfied with the cut and will consider it sufficient to sustain the prices that are now in free fall.