As per the agreement made late on Thursday by OPEC+ that includes Russia wherein production cut of 10 mbpd has been hinted, crude oil jumped by as 11% after sinking to lowest level since 2002. This ends the high-stake price war between the commodity's major producers Saudi Arabia and Russia which was another blow amid Covid 19 which had already strangled oil demand globally.
With the agreement over the supply deal, benchmark brent closed at around $32.02 per barrel while West Texas Intermediate also rallied to settle at $23.56 per barrel. In July 2008, oil prices peaked to $147 per barrel.
This production cut was important as due to covid 19 pandemic the demand is seen to crash by 10mbpd for the March-April period which in an usual course on a daily basis at global level stands at 101 mbpd.
"The impact on the oil market is also unprecedented. Large-scale oil demand destruction, and the resulting massive supply and demand imbalance, have the potential to fill global storage capacity quickly and force production shutdowns. The adverse impact on oil exporting country revenues is huge, at a time when these countries are facing the human tragedy of the pandemic and the resulting economic downturn," said Mohamed Arkab, Algeria's energy minister and president of the 2020 Opec conference.
The 9th extraordinary Opec and non-Opec ministerial meeting was organized through webinar in the backdrop of the coronavirus pandemic.
With organisations like Paris based IEA and OPEC cutting global oil demand growth outlook, the energy sector is still to face headwinds.