Oil-producing nations led by Russia, the U.S. and Saudi Arabia reached an unprecedented agreement on Sunday to cut oil production by 9.7 million barrels per day, or nearly 10 percent of what is currently produced, as The New York Times reported.
Since the COVID-19 pandemic has triggered lockdowns around the world, the demand for oil has plummeted nearly 35 percent, causing huge surpluses in oil supply and deep drops in the price of crude oil, which fell to 18-year lows. The new agreement to slash oil production starting in May is twice the size of the cuts agreed to during the global financial crisis 12 years ago and signals a truce in a growing price war between Russia and OPEC’s de facto leader, Saudi Arabia, according to The Guardian.
The alliance, called OPEC+, includes OPEC members as well as non-members like Russia and Mexico, but not the U.S. The deal was struck after marathon negotiations and concessions made to Mexico, which held up the deal. Mexico opposed the amount it was being asked to cut, but finally agreed to cut 100,000 barrels per day, instead of its initial allocation of 400,000 barrels per day, according to NBC News.
The deal means oil producers will drop their production in May and June and then steadily increase it again until the deal expires in two years. That also means that most Americans will actually see the price of gasoline go up, leaving some to wonder why a U.S. president would broker a deal that will make Americans pay more at the pump, according to POLITICO. It seems Trump was spurred by the U.S. shale oil industry, which asked for help after oil prices dropped to an 18-year low. The industry has been amongst his most loyal supporters.
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