Mike Sommers, CEO of the American Petroleum Institute, joins "Squawk Alley" to discuss the cuts to oil production and worldwide demand.

OPEC and its oil producing allies on Sunday finalized a historic agreement to cut production by 9.7 million barrels per day, following days of discussions among the world’s largest energy producers.

It’s the single largest output cut in history.

West Texas Intermediate crude, the U.S. benchmark, was up 0.83% on Monday to $22.95 per barrel. Brent crude was down 0.22% to $31.41.

Sunday’s emergency meeting — the second in four days — came as oil-producing nations scrambled to reach an agreement in an effort to prop up falling prices as the coronavirus outbreak hammers demand. The agreement ends a Saudi Arabian-Russian price war that broke out at the beginning of March and had pressured oil prices as each sought to gain market share.

On Thursday, OPEC+ proposed cutting production by 10 million barrels per day — amounting to some 10% of global oil supply — but Mexico opposed the amount it was being asked to cut, holding up the final deal.

Talks continued on Friday when energy ministers from the Group of 20 major economies met, and while all agreed that stabilization in the market is needed, the group stopped short of discussing specific production numbers.

Under OPEC+’s new agreement, Mexico will cut 100,000 bpd, a quarter of what it had been asked to cut on Thursday.

The 9.7 million bpd cut will begin on May 1 and will extend through the end of June. The cuts will then taper to 7.7 million bpd from July through the end of 2020, and 5.8 million bpd from January 2021 through April 2022. The 23-nation group will meet again on June 10 to determine if further action is needed.

“This is at least a temporary relief for the energy industry and for the global economy,” Rystad Energy’s head of analysis Per Magnus Nysveen told CNBC in an email. “Even though the production cuts are smaller than what the market needed and only postpone the stock building constraints problem, the worst is for now avoided.”

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