This is thought to be the single biggest cut on oil output in history. The agreement was reached on Sunday by OPEC – the Organisation of the Petroleum Exporting Countries – as well as other nations, and follows days of discussions following plummeting oil prices driven by lack of demand.
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The agreement has also reportedly ended an oil price war between Russia and Saudi Arabia which began earlier this year.
This price war had exacerbated the issue by driving prices down even further.
According to the agreement, oil production cuts will begin on May 1, with the 9.7 million bpd cut lasting until the end of June, CNBC reports.
Cuts will then lessen over the course of a couple of years, reducing to eight million bpd from July until the end of 2020.
Members of OPEC and other nations agreed the new deal yesterday (Image: Ryad Kramdi / AFP / GETTY)
This will then reduce further to six million bpd from Jan 2021 until April 2022.
Per Magnus Nysveen, head of analysis at Rystad Energy, told CNBC that the cuts did not go far enough and that they would “only postpone” oil stock issues.
However, he added that “the worst is for now avoided.”
US president Donald Trump has said that the deal will help save jobs in the US energy industry, and took to Twitter to lend his support.
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Donald Trump – pictured here at a White House press briefing – was positive about the deal. (Image: Alex Wong / GETTY)
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He said: “The big Oil Deal with OPEC Plus is done. This will save hundreds of thousands of energy jobs in the United States.
“I would like to thank and congratulate President Putin of Russia and King Salman of Saudi Arabia. I just spoke to them from the Oval Office. Great deal for all!”
Mr Trump has also said that the US would help take a share of Mexico’s oil cuts.
It is reported that Mexico initially opposed the amount that it was being asked to cut – 400,000 barrels per day – and accepted a reduced amount of 100,000 barrels per day instead.
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Oil prices dropped to their lowest levels in nearly two decades last month. (Image: Yasser Al-Zayyat / AFP / GETTY)
He said Mexico would pay the US back further down the line.
And it is hoped that other nations outside of the OPEC/OPEC+ group will also cut production in order to keep prices high.
Prices crashed to their lowest levels in nearly 20 years late last month.
For WTI Crude, the price per barrel was only just above $20 on Monday, March 30.
Most the world is battling the deadly coronavirus pandemic (Image: EXPRESS)
It has since risen to a high of around $28.30 on April 3, although its current price is $22.61.
And Brent Crude, which is extracted from the North Sea, fell as low as around $24.74 at the start of April, though it has since recovered somewhat to $31.36.
For comparison, the price of Brent Crude was around $66 at the start of the year, and the price of WTI Crude was around $61.
The Covid-19 pandemic has affected economies all across the world, with the oil industry not the only one affected.
Businesses across the world have closed because of lockdown measures, harming the economy and staff financially. (Image: Bill Tompkins / GETTY)
Lockdowns imposed by governments with the aim of reducing transmission of the virus have resulted in the closure of many businesses, as well as the laying off or furloughing of staff.
According to the BBC, Kristalina Georgieva, head of the International Monetary Fund (IMF) has warned that the world is facing the worst economic crisis since the Great Depression.
And a UN study has reportedly claimed that 81 percent of the world’s workforce has had their place of work either fully or partially closed due to the pandemic.