Oil-rich nations on Thursday cut a tentative deal to reduce production by 10 million barrels a day, cooling a trade war between Russia and Saudi Arabia as prices at the pump fall amid the coronavirus outbreak.
Saudi Arabia and Russia had both stepped up production as the pandemic began to spread, causing an oversupply of petroleum as demand for oil has dropped by 30 percent in recent weeks.
The deal, negotiated at a virtual meeting of the Organization of the Petroleum Exporting Countries and other oil-producing countries known as OPEC+, represents a 10 percent decrease in global oil production for May and June.
The bulk of those reductions come from Saudi Arabia and Russia, who according to the Financial Times will together reduce production by 5 million barrels while other countries make up the rest.
Speaking with reporters late Thursday, President TrumpDonald TrumpTrump lawyers to Supreme Court: Jan. 6 committee 'will not be harmed by delay' Two House Democrats announce they won't seek reelection DiCaprio on climate change: 'Vote for people that are sane' MORE said he had spoken with Saudi Crown Prince Mohammed bin Salman.
"We had a big talk as to oil production and OPEC and making it so that our industry does well and the oil industry does better than it's doing right now. The numbers are so low that there'll be layoffs all over the world. There'll be certainly layoffs in this country we don't want that to happen," Trump said.
"They're getting close to a deal. We'll soon find out."
Deliberations are currently stalled as negotiators wait on Mexico to agree to the terms.
The 10 million barrel per day figure could be expanded at a coming Group of 20 meeting set for Friday which could deliver a commitment to reduce global production by another 5 million barrels a day.
The production decrease could bring some stability to oil markets. Oil fell below $22 a barrel in March after selling for $50 a barrel for much of February.
Though a 10 percent drop in production doesn’t match the 30 percent decrease in demand, the industry is hopeful it will help make a dent in the oversupply and ease tensions until economies can begin to recover.
"If we were squealing about a 3 million barrel increase or so, a 10 million cut is a pretty big move in the other direction," Derrick Morgan with the Association of Fuel and Petrochemical Manufacturers, which represents oil refineries, said in reference to the increase in production from Russia and Saudi Arabia.
It may also stave off White House efforts to impose tariffs on crude imports or force U.S. production cuts — moves largely opposed by the oil industry.
Trump floated such ideas Monday despite resolving to let market forces settle the problem just a few days before.
"They seem to have stepped up and reacted to urging by the administration to voluntarily restrain their own production, which relieves pressure on any kinds of tariffs or bans or quotas on imports into the U.S. by refineries," Morgan told The Hill, a relief to refiners who still import about 15 percent of crude from outside North America.
The agreement between Saudi Arabia and Russia follows considerable pressure from both Trump and U.S. lawmakers largely directed at the mideast kingdom.
“Failure to address this energy crisis will jeopardize the joint efforts between our nations to collaborate economically and militarily,” several House Republicans wrote in a letter earlier this week to Crown Prince Mohammed bin Salman.
“If the Kingdom fails to act fairly to reverse this manufactured energy crisis, we would encourage any reciprocal responses that the U.S. government deems appropriate.”
Sen. Kevin CramerKevin John CramerOvernight Defense & National Security — Texas hostage situation rattles nation Senators to meet with Ukraine president to reaffirm US support How a nice-guy South Dakota senator fell into a Trump storm MORE (R-N.D.), among those in the Senate to criticize the Saudi production surge, said he was encouraged by the tentative deal but stressed the market impacts may be felt for years.
“If these actions are enough to provide market stability … the United States will be further empowered to take immediate action,” he said in a statement Thursday.
Oil industry representatives said the biggest factor for industry recovery will be a rebounding economy.
"While this move will help stabilize world oil markets,” the American Petroleum Institute wrote in a statement, “the best thing for the energy industry – and the entire U.S. economy – is to slow the spread of COVID-19 and stimulate the economy until demand stabilizes and it’s safe for Americans to return to work."
Updated: 7 p.m.