The US and the G20 are preparing to back plans for the largest oil supply agreement in history, throwing their weight behind production cuts by Opec and Russia and offering additional contributions to stabilise an industry devastated by the coronavirus pandemic. Oil demand has fallen by roughly a third as some of the world’s largest economies have effectively shut down to try and stop the virus’s spread, driving crude prices to their lowest in 18 years and threatening millions of energy sector jobs and long-term damage to supplies. Saudi Arabia and Russia, whose alliance leads the so-called Opec+ group, agreed on Thursday to cut production by a record 10m barrels per day, with contributions from G20 members – including buying up crude to fill emergency stockpiles, and investment cuts in new oil supplies – expected to further boost the total towards a notional 15m b/d, or almost 15 per cent of global supplies.
At the emergency online meeting of G20 energy ministers on Friday, Fatih Birol of the International Energy Agency said the “shockwaves” of the coronavirus pandemic had created the oil crash and threatened “global economic stability”. “The oil world has seen many shocks over the years, but none has hit the industry to the degree we are witnessing today,” said Mr Birol, who leads the world’s top energy “Nobody should harbour the idea that these measures provide a quick fix . . . [But] like the effect of confinement on the spread of Covid19, actions to address the oil market imbalance will help lower the peak and flatten the curve.”
The expected deal will mark a diplomatic victory for US President Donald Trump, who had pressured Saudi Arabia, Opec’s most powerful member, and Russia to end a month-old price war that had exacerbated the crisis in energy markets. He held talks with Saudi Arabia’s Crown Prince Mohammed bin Salman and Russia’s President Vladimir Putin on both Thursday and Friday, having threatened tariffs on their oil sales if they did not reach a deal.