RIYADH — OPEC+, the group composed of OPEC, Russia and other oil producing nations, has successfully concluded a deal to cut oil output by nearly 10 million barrels per day (bpd), which amounts to 10 percent of global supply, after a compromise with Mexico, during the virtual extraordinary meeting on Sunday.

“By the grace of God, then with wise guidance, continuous efforts and talks since the dawn of Friday, we now announce the completion of the historic agreement to reduce production by approximately 10 million barrels of oil per day from members of OPEC + starting from May 1, 2020,” Kuwait’s oil minister Khaled Al-Fadhel tweeted.

Mexico’s oil minister Rocio Nahle also said on Twitter: “Mexico appreciates all the support of the countries of OPEC at the extraordinary meeting held today. The unanimous agreement of the 23 participating countries will initiate a reduction in oil output by 9.7 million barrels per day from May.”

Mexico had been holding out on cutting its output by 400,000 bdp as per the proposed OPEC+ deal required and countered with an output cut of 100,000 bdp.

Measures to curb the spread of the coronavirus have destroyed demand for fuel and driven down oil prices, straining budgets of oil producers and hammering the US shale industry, which is more vulnerable to low prices due to its higher costs.

Mexico President Andres Manuel Lopez Obrador said on Friday that US President Donald Trump had offered to make extra US cuts on his behalf, an unusual offer by a Trump who has long railed against OPEC.

Trump said Washington would help Mexico by picking up “some of the slack” and being reimbursed later. He did not say how this would work.

Meanwhile, Rystad Energy’s Bjornar Tonhaugen, head of oil markets, said, “On a positive note, OPEC+ today managed to reach a historic deal to make the single largest output cut in history, after a compromise was reached with Mexico.

“However, even though OPEC+ has decided to attempt to bail out the global oil market, the group has unfortunately only come up with half of the ransom money. We believe the market’s disappointment will reflect in prices already from April due the lack of size and the speed of the supply removal.

“At least the global oil market may not exhaust the storage capacity as early as it would without the voluntary production cuts. The oil market will see enormous stock builds in April as the deal is only in effect from May 1, while gradual shut ins and production declines will already happen during the current month.

“We believe oil prices will see renewed downwards pressure. Further down the line, however, this deal may be bullish as OPEC+ plans to endure with the 6 million bpd cut through 2021, when oil demand most likely will have recovered back to normal and as supply capacity will have sustained a lasting damage.”

Per Magnus Nysveen, head of analysis at Rystad Energy, was of the view, “This is at least a temporary relief for the energy industry and for the global economy. This industry is too big to be let to fail, and the alliance showed responsibility with this agreement. Even though the production cuts are smaller than what the market needed and only postpone the stock building constraints problem, the worst is for now avoided.

“The rest of oil producing countries should also prepare to cut output to align with domestic refineries and fuel consumption, which is expected down globally by 27 million bpd in April and 20 million bpd in May.” — Arabiya English/Rystad Energy