The Saudi-Russia oil price war ended on Sunday, April 12, with the world's top oil producing countries reaching a historic deal to address the collapse in oil prices. Negotiations were concluded on Sunday following an earlier agreement chalked out on Friday, which was not acceptable to Mexico.

What have the OPEC+ members agreed upon?

putin-high-fives-saudi-crown-prince-at-g20-amid-controversy-over-khashoggi-killing

The Vienna-based Organization of the Petroleum Producing Countries (OPEC), which is led by Saudi Arabia and its allies, struck the historic deal with led by Russia on Sunday.

The countries have agreed to slash oil production by 9.7 million barrels per day from May onward, AFP reported. The amount slashed represents about 10% of the global supply. However, it is slightly less than the reduction of 10 million barrels per day, decided on Friday.

According to the agreement, the countries will keep gradually decreasing curbs on production in place for two years until April 2022.

OPEC Secretary General Mohammad Barkindo termed the cuts as "historic". "They are largest in volume and the longest in duration, as they are planned to last for two years", Barkindo said.

How did the world leaders react?

U.S. President Donald Trump took to Twitter "to thank and congratulate President Putin of Russia and King Salman of Saudi Arabia". The deal "will save hundreds of thousands of energy jobs in the United States", the President wrote.

Saudi Energy Minister Prince Abdulaziz bin Salman, who chaired the meeting with his Russian and Algerian counterparts, said that the meeting "ended with consensus".

"By the grace of Allah, then with wise guidance, continuous efforts and continuous 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 1 May 2020", Kuwait's energy minister Dr Khaled Ali Mohammed al-Fadhel tweeted.

In a phone call, Russian President Vladimir Putin and his U.S. counterpart Donald Trump, agreed on the "great importance" of the deal.

"This is good. We welcome any news that brings stability to global oil markets", Canadian Natural Resources Minister Seamus O'Regan tweeted.

Effect of the OPEC+ deal

On Monday oil rose by over $1 per barrel, in early trading in Asia, with US benchmark West Texas Intermediate (WTI) climbing by 7.7% to $24.52 a barrel, while Brent was up 5.0 percent to $33.08.

What led to the collapse in oil prices?

The novel coronavirus pandemic has forced governments to introduce varying degrees of lock-downs. This has led to a fall in economic activity, resulting in the slump in demand of crude oil, that led to the prices crashing down.

Along with this, Saudi Arabia and Russia, the key oil producers, engaged in a price war. They ramped up production to hold on to their market share and undercut US shale producers. In March, oil prices reached an 18-years low, due to the above two factors.