FX.co ★ Major oil producers finalize output cuts

The oil market has finally seen some signs of improvement. After the new OPEC+ agreement on oil cuts had been reached, crude prices began to rise slightly. Notably, the US also took part in the deal although not being the OPEC+ member. At the moment, oil prices are still too weak to return to the previous highs but the imposed limits on production raise hopes for oil’s quick recovery. The success of the deal will depend on how the participants will be committed to limiting the output. It is believed that Saudi Arabia has played a key role in the new deal. In early March, Russia refused to support additional supply cuts thus sparking a price war with the Saudis. Riyadh, in response, slashed its crude prices and flooded the market with cheap oil. The Kingdom could have maintained its tough stance and refused to participate in any further talks. However, the Saudis agreed to continue negotiations. Besides, the Saudis insisted that Mexico should also join the cuts. Finally, the OPEC and allies managed to strike the deal. However, there are still questions on how the deal will be implemented, especially in the US and Canada where the rules of the free market do not allow any government restrictions on the oil industry. Under the new OPEC+ deal, the oil producers agreed to reduce output in May and June this year although this may still not be enough to stabilize the market.