U.S., Saudi Arabia, Russia Agree to Lead Unprecedented Oil Output Deal

Saudi Arabia, Russia and the U.S. have agreed to lead a multinational coalition in major oil-production cuts after a drop in demand due to the coronavirus crisis and a month-long Saudi-Russian feud had devastated oil prices. The deal, sealed Sunday, came after President Trump intervened to help resolve a Saudi-Mexico standoff that jeopardized the broader pact.

As part of the deal, 23 countries committed to collectively withold 9.7 million barrels a day of oil from global markets. The unprecedented agreement is designed to address a mounting oil glut resulting from the pandemic’s erosion of oil demand.

On a hastily convened conference call Sunday with delegates from the 13-nation Organization of the Petroleum Exporting Countries and other nations including Russia, participants raced to strike a deal before oil markets opened on Monday. They expected oil prices to crash on Monday if no agreement had been clinched.

President Trump and his representatives were not present at the meeting. Still, the American president’s presence loomed large. Trump had intervened with Saudi Arabia and Mexico and helped to settle the dispute.

Under the final deal announced Sunday, Mexico will cut 100,000 barrels a day of output, some 250,000 barrels fewer than Saudi Arabia initially wanted. The U.S. unlocked the standoff by pledging to compensate the Mexican amount with 300,000 barrels of reductions of its own, the delegates were told.

It remains unclear how the U.S. cuts would be carried out. Participants were also told the U.S., Canada and Brazil will hold back as much as 3.7 million barrels a day but some of the reductions will be market-driven losses.

Oil prices have lost 40% since early March, when Saudi Arabia and Russia failed to agree on an emergency plan to address an oil-market supply glut as the coronavirus outbreak spread. After the two nations split, Saudi Arabia embarked on an aggressive price war in an attempt to grab market share from Russia.

President Trump Joins the Cartel?
For decades, Mr. Trump has been a vociferous opponent of the cartel, deeming its efforts an evil force that squeezed American motorists. But the price war between Saudi Arabia and Russia threatened a vibrant U.S. oil industry and led to what seemed to be a change of heart.

But in addition to prodding both sides into an agreement, the U.S. has also warned it would retaliate if Saudi Arabia didn’t turn off the spigots. On April 4, U.S. Mr. Trump threatened to impose tariffs on crude imports if he has to “protect” U.S. energy workers from an oil flood from producers such as Saudi Arabia.

Comments from the President After the Announcement
U.S. President Donald Trump on Sunday praised a deal among the world’s top oil producers to cut global petroleum output, saying it would save jobs in the U.S. energy industry.

“This will save hundreds of thousands of energy jobs in the United States,” Trump said, adding that he thanked and congratulated Russian President Vladimir Putin and Saudi Arabia’s King Salman.