In the 10th extraordinary OPEC and non-OPEC ministerial meeting held via video conference, on Sunday, the world's top oil suppliers decided that they will slash production by 9.7 million barrels a day for May and June, roughly in line with the 10 million figure that was floated late last week.
Brent crude prices rose by 4.19 per cent or $1.32 per barrel to $32.80 while the West Texas Intermediate (WTI) crude was priced at $23.87 per barrel, higher by $1.15 or 5.05 per cent from their previous closing levels.
Following the much-anticipated agreement, US President Donald Trump also congratulated the Russain President and the King of Saudi Arabia.
"The big Oil Deal with OPEC Plus is done. This will save hundreds of thousands of energy jobs in the United States. I would like to thank and congratulate President Putin of Russia and King Salman of Saudi Arabia. I just spoke to them from the Oval Office. Great deal for all," Trump tweeted.
The meet of OPEC and its allies was scheduled to be held last week, but was delayed which caused further anxiety in the oil market and oil prices fell.
In early March, talks between OPEC and Russia for crude production cuts fell apart triggering a bloodbath in oil market.
It was reminiscent of the Cold War days when the mistrust between Soviet Union and the US kept the world on the brink.
Talks between oil cartel Organization of OEPC and Russia had collapsed as the two sides failed to agree on an output cut deal, and the falling apart of the talks brought havoc to the oil industry as prices fell to multi-year low and the industry was staring at huge losses.
This was immediately followed by Saudi Arabia declaring retaliatory action by deciding to actually increase oil production in April to maintain market share. This along with further squeeze in demand following Covid-19 outbreak took global oil price to plunge below $25 a barrel.
Sources said Russia was not interested in production cut earlier to counter US Shale that was fast entering international trade preventing a big rise in oil prices. Many high cost producers of shale would have declared bankruptcies had the low prices continued anytime longer.
With a broader oil production cuts that also includes other large producers such as Canada, Norway is expected to stabilize oil prices for now. Analysts however feel that unless demand picks up in coming months, oil may be range bound between $35-40 per barrel.