Top oil nations were finalising a deal at G20 talks on Friday for big output cuts to lift prices slammed by the coronavirus crisis with Russia and Saudi Arabia taking a lion’s share and signs the United States might take unprecedented moves to help.
Riyadh, Moscow and its allies, which make up the informal Opec+ group, had forged a pact to curb crude production by the equivalent of 10 per cent of global supplies in marathon talks on Thursday and said they wanted others to cut a further 5 per cent.
But efforts to conclude the Opec+ deal hit the buffers when Mexico refused to sign up in full.
However, the Mexican president said Donald Trump had told him he might make cuts on Mexico’s behalf, even though the US president has given no public indication Washington would join in the cuts and has instead threatened Saudi Arabia with tariffs and other measures if it did not resolve the oil market crisis.
Major oil markets were closed on Friday as the G20 energy ministers held a video conference, hosted by Saudi Arabia.
The United States agreed on Thursday to make 250,000 barrels per day in additional cuts to oil output to help Mexico contribute to global reductions, Mexican president Andres Manuel Lopez Obrador said on Friday.
Speaking at a regular news conference, Lopez Obrador said Mexico, which is an Opec ally, had been pressed to make cuts of 400,000 barrels per day (bpd), before the group lowered the target to 350,000 bpd.
Lopez Obrador, who has made increasing oil output one of the priorities of his administration, said US President Donald Trump had spoken to him on Thursday and offered to help before Mexico announced it would cut output by 100,000 barrels per day.
“President Trump said the US committed to reducing by 250,000 (barrels), on top of what it was going to do, for Mexico, in order to compensate,” he said.
Lopez Obrador suggested the US leader had initiated the conversation, saying, “President Trump got in touch with us.” The White House did not immediately reply to a request for comment on Lopez Obrador’s remarks.
Lopez Obrador’s announcement of US cuts came as a surprise, given Trump’s past reluctance to ask for coordinated cuts by US oil producers.
Measures to curb the spread of coronavirus have dried up the demand for fuel for planes and cars, straining budgets of oil producing nations and hammering the US shale oil industry that is more vulnerable to low oil prices due to it higher costs.
“We call on all nations to use every means at their disposal to help reduce the surplus,” US energy secretary Dan Brouillette told the G20 talks, adding that it was “extremely disappointing” that Moscow and Riyadh had not finalised a deal.
The Opec+ pact, if Mexico signs up, would see 10 million barrels per day (bpd) of oil removed, with an additional 5 million bpd withdrawn if the others such as the United States joined. Norway and Canada, both outside Opec+, have already indicated they could cut.
Brouillette said US oil output could fall between 2 million bpd and 3 million bpd by the end of 2020, although Russia has previously said such a natural decline in output was not the same as a formal cut.
