Mexico has reached a deal on oil-production cuts with the OPEC+ group after an intervention from the US.
Mexico was the lone holdout from a meeting held Wednesday of the Organization of Petroleum Exporting Countries (OPEC), Russia, and others, known as the OPEC+ group. The country had been asked to cut 400,000 barrels per day (bpd), a figure Mexican authorities balked at.
US President Donald Trump has agreed to cut an additional 250,000 bpd in production, on top of any other cuts, while Mexico will cut 100,000 bpd, Mexican President Andrés Manuel López Obrador said, Bloomberg reported.
“First they asked us for 400,000, then 350,000,” he said. Trump’s “very generously expressed to me that they were going to help us with an additional 250,000 to what they are going to contribute. I thank him,” López Obrador added.
OPEC+ agreed Thursday to a collective cut in output of 10 million bpd, before asking other nations for a further 5 million bpd of cuts, but the group had said that a final agreement was dependent on Mexico signing up to the pact after it balked at the cuts it was asked to make.
“I hope (Mexico) comes to see the benefit of this agreement not only for Mexico but for the whole world. This whole agreement is hinging on Mexico agreeing to it,” Saudi Energy Minister Prince Abdulaziz bin Salman told Reuters by telephone.
Oil markets have been suffering from chronic oversupply as the coronavirus pandemic devastates demand for petroleum products. Prices fell on Thursday despite the agreement, as traders reckoned that even a combined reduction of 15 million bpd would be too little to stabilize the market.
“The agreed cuts are woefully inadequate unless we see the US and Canada join in cuts in a big way at today’s G20 energy ministers meeting,” said Jeffrey Halley, senior market analyst at trading firm OANDA.