Led by Russia and Saudi Arabia, the group of 23 countries pledged to cut production by at least 10 million barrels a day – ending a price war that cut crude oil by 50 pc last month.
The deal was reached following a virtual meeting Thursday between the Saudi-led OPEC cartel and Russia, which had repeatedly rejected plans to limit production.
Crude Brent rose to 8pc due to hope for a deal before dropping after the announcement to just under $ 34, up 2.4pc on the day.
The final amount shot by the alliance could be closer to 12 million barrels a day, sources said, as well as reductions of an additional five million barrels by the United States, Canada and others.
It is unclear whether the new deal depends on US acceptance also of slowing production, a move that would go against the country’s free market philosophy and would likely be controversial.
Both Moscow and Riyadh decided to flood the market after talks failed last month, while the coronavirus crisis caused an unprecedented collapse in demand.
The situation has now become so dire that countries should speculate on the oil spill when the world is running out of storage space.
Bjornar Tonhaugen, of the consultant Rystad Energy, said that even a reduction of 10 million barrels would still leave a surplus supply of 20 million per day.
Without deeper cuts involving more countries, he said, the cut will not drive up prices.
Oil diplomats from around the world are expected to meet Friday at a virtual gathering of energy ministers from the G20 group of nations, in a final attempt to help advance a deeper deal involving the United States.
But such is the magnitude of the market crisis, crude Brent lost much of its earnings the day after the announcement of the initial agreement.
The fight between the world’s two largest oil producers broke out in early March after Russia turned down a request from Saudi Arabia to cut production further.
Saudi Arabia and Russia have been working together since 2017 to raise oil prices by cutting production in unison, but the alliance fell apart after the pair failed to reach an agreement.
The fallout – exacerbated by the decimation of economic activity in the aftermath of the coronavirus – has caused the biggest oil price crash since the 1991 Gulf War.
The market downturn that followed allowed Saudi Arabia to buy stakes in four major European energy companies at a discount, it was revealed on Thursday.
The kingdom has accumulated positions of more than $ 1 billion (£ 800 million) in Equinor, Royal Dutch Shell, Total and Eni, and may continue to buy stocks, sources told the The Wall Street newspaper.