OPEC-Plus, a group of 23 oil-producing countries that includes Russia, agreed on Sunday to reduce output by 9.7 million barrels per day for May and June. The agreement also calls for OPEC-Plus members to keep oil production reduced from the current level by 6 million barrels per day through April 2022. US President Donald Trump tweeted the success of the negotiations Sunday morning.

The Kremlin announced that Russian President Vladimir Putin Vladimir had a telephone conversation with US President Donald Trump and King of Saudi Arabia Salman Ben Abdel Aziz Al Saud. The leaders supported the agreement reached within the OPEC-plus on phased voluntary limitation of oil production in order to stabilize global markets and ensure the sustainability of the global economy as a whole.

Reuters reported that the OPEC-Plus group expects all combined reductions in global oil production to amount to more than 20 million barrels per day—about 20% of the global supply, starting on 1 May.

Estimates put the collapse in oil demand due to the COVID-19 pandemic at around 30 million barrels per day.

Commenting on the deal, Daniel Yergin, Vice Chairman, IHS Markit, noted:

Everything about the virus crisis is unprecedented, including this mega-deal, which six weeks ago could not have been imagined. Also, what could not have been imagined is that Donald Trump, who has been a critic of OPEC for years, is the one who put it together. Of all the deals he’s done in his life, this has to be the biggest and most complex. He had to be not only dealmaker but also divorce mediator, after the OPEC-Plus relationship split up six weeks ago.

Mission Impossible turned out to be Mission Possible. It would not have seemed in the cards three weeks ago that something like this could possibly happen. Among other things, it reflected a pivot on the part of President Trump from focusing on low gasoline prices to focusing on the national security implications of devastating the US oil industry. Low gasoline prices are not a big thing at a time when most everybody is at home and can’t drive anyway.

What facilitated the deal was the realization on the part of the major producers that they were not, in any event, going to be able find markets for their oil at high production levels.

What this deal does is enable the global oil industry and the national economies and other industries that depend upon it to avoid a very deep crisis. Without this deal, the global industry would have run out of storage for the flood of excess oil in a few weeks and prices would have crashed, which would have also really hit financial markets. This restrains the build-up of inventories, which will reduce the pressure on prices when normality returns—whenever that is.