The world’s top oil producers pulled off a historic deal to cut global petroleum output by nearly a 10th, putting an end to the devastating price war between Saudi Arabia and Russia. After a weeklong marathon of bilateral calls and four days of video conferences with government ministers from around the world – including the Opec+ alliance and the Group of 20 nations – an agreement finally emerged to tackle the impact of the global pandemic on demand. The talks almost fell apart because of resistance from Mexico, but came back from the brink after a weekend of urgent diplomacy, including the personal intervention of President Donald Trump, who helped broker the solution. “Unprecedented measures for unprecedented times,” said Ed Morse, a veteran oil watcher who is head of commodities research at Citigroup. “Unprecedented in historical discussions of production cuts, the US played a critical role in brokering between Saudi Arabia and Russia for the new Opec+ accord.” Opec+ will cut 9.7 million barrels a day – just below the initial proposal of 10 million. The US, Brazil and Canada will contribute another 3.7 million barrels on paper as their production declines. Opec officials were still waiting to hear more from Group of 20 members – though it’s not clear if those numbers will represent real cuts or just production idled because of market forces. Mexico won a diplomatic victory as it will only cut 100,000 barrels – less than its prorated share, having blocked the deal since the plan was first revealed on Thursday. Will deal to end the oil price war be enough as global economy grinds to a halt? The Opec+ deal caps a tumultuous month when Brent crude, the global benchmark, plunged to its lowest in nearly two decades, falling toward US$20 a barrel. Earlier this year, it traded above US$70 a barrel. Opec+ ministers had to race onto a video conference call on Easter Sunday, less than four hours before the oil market reopened, to close the deal. “We have demonstrated that Opec+ is up and alive,” Saudi Energy Minister Prince Abdulaziz bin Salman told Bloomberg News in an interview minutes after he clinched the deal. “I’m more than happy with the deal,” he added. With the virus paralysing air and ground travel, demand for petrol, jet fuel and diesel is collapsing. That threatened the future of the US shale industry, the stability of oil-dependent states and squeezed the flow of petrodollars through an ailing global economy. Even though Moscow and Riyadh put their differences aside to reach the deal, the biggest winner appears to be Trump, who refused to actively cut American oil production and personally brokered the deal over phone calls with Mexican President Andres Manuel Lopez Obrador, Russian President Vladimir Putin and King Salman of Saudi Arabia. “The big Oil Deal with OPEC+ is done. This will save hundreds of thousands of energy jobs in the United States,” Trump wrote on Twitter, thanking Putin and King Salman for pushing the deal through. As oil industry nears collapse, Saudi Arabia may have no option but to blink first “I just spoke to them … Great deal for all,” Trump said. Trump became the first American president to push for higher oil prices in more than 30 years, reversing his personal opposition to the cartel. “I hated Opec. You want to know the truth? I hated it. Because it was a fix,” Trump told reporters at the White House last week. “But somewhere along the line that broke down and went the opposite way.” The production restraints are set to last for about two years, though not at the same level as the initial two months. Copying the model adopted by central banks to taper off their bond buying, Opec will also reduce the size of the cuts over time. After June, the 10 million barrel cut will be tapered to 7.6 million a day until the end of the year, and then to 5.6 million through 2021 until April 2022. Under the deal, Saudi Arabia will cut its production just a fraction under 8.5 million barrels a day – its lowest level since 2011. The Opec+ deal measures the Saudi cut from a baseline of 11 million barrels a day, the same as Russia. But in reality the kingdom’s production will decline from a much higher level. In April, Saudi Arabia boosted output to a record 12.3 million barrels a day as part of its war with Russia for market share. “We want to regain the stability of the oil market,” Prince Abdulaziz said. The question now for the oil market is whether the cuts will be enough to throw a floor under prices as demand for energy craters. With countries around the world extending their lockdowns, the death toll mounting in New York, and unemployment exploding in America, the oil market is now far more worried about consumption than supply. Opec itself acknowledged the challenge, with its chief warning ministers demand fundamentals were “horrifying”. In an internal presentation seen by Bloomberg News, Opec told ministers it expected global oil demand to plunge 20 million barrels a day in April. “Demand is down by more than double the 9.7 million barrels-a-day cut agreed,” said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. “And with the issue with Mexico taking so long to sort, the credibility of the group has taken a hit”. Additional reporting by Reuters Sign up now and get a 10% discount (original price US$400) off the China AI Report 2020 by SCMP Research. Learn about the AI ambitions of Alibaba, Baidu & JD.com through our in-depth case studies, and explore new applications of AI across industries. The report also includes exclusive access to webinars to interact with C-level executives from leading China AI companies (via live Q&A sessions). Offer valid until 31 May 2020.