Oil surges as Saudi Arabia and Russia end price war by agreeing on production cuts
- Saudi Arabia, Russia, and the OPEC+ coalition agreed on Thursday to slash crude oil production, a move that's expected to boost prices.
- The agreement puts an end to an oil-price war that's raged for weeks as the Saudis and Russians signaled production increases, diluting the resource's price-per-barrel.
- US West Texas Intermediate crude rose as much as 12% on the news, while Brent crude gained 11% at intraday highs.
- Watch oil trade live on Markets Insider.
Oil surged as much as 12% on Thursday as Saudi Arabia, Russia, and the OPEC+ coalition agreed to slash crude oil production, a move that's expected to boost prices going forward.
US West Texas Intermediate crude rose 12% to $28.36 per barrel at intraday highs. International benchmark Brent crude gained as much as 11% to $36.40 per barrel. Both pared gains midday as traders digested the lastest developments.
The agreement emerged from a virtual meeting on Thursday that saw OPEC+ outline a deal to slash production by 10 million barrels a day, Bloomberg reported, citing delegates familiar with the matter. As part of the deal, Saudi Arabia will cut daily production by 4 million barrels, while Russia will lower its output by 2 million a day, according to the Wall Street Journal.
OPEC+ is also expected to seek an output reduction of 5 million barrels a day for Group of 20 nations, Bloomberg reported. Thursday's discussions will set the pace for a Friday meeting with G-20 countries and the US, another key oil-market player.
The commodity has plummeted as the coronavirus pandemic has cratered global demand as flights are cancelled and consumers are told to stay home and practice social distancing. At the same time, the OPEC+ was long unable to agree on further production cuts after April 1, prompting Saudi Arabia and Russia to prepare to boost production to record levels.
That sent prices down further, with analysts and industry watchers forecasting even more pain ahead. The US Energy Information Administration this week slashed its 2020 outlook and said it would be a net importer of crude oil and petroleum for the first time since 2019 in an effort to aid talks.
Still, analysts worry that the production cuts won't be enough to significantly lift low oil prices. If it isn't, oil could fall below $20 per barrel again, RBC warns.