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The OPEC and nations including Russia have agreed to boost oil prices by cutting as much as 10 million barrels a day in production, or a tenth of global supply. More countries, including the United States, were discussing their own cuts in what would be an unprecedented global pact to stabilize the market.
The agreement between OPEC and partner countries aims to cut 10 million barrels per day until July, then 8 million barrels per day through the end of the year, and 6 million a day for 16 months beginning in 2021.
Mexico
had initially blocked the deal but its president, Andrés Manuel López Obrador, said Friday that he had agreed with U.S. President Donald Trump that the U.S. will compensate what Mexico cannot add to the proposed cuts .
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“The United States will help Mexico along and they’ll reimburse us some time at a later date when they’re prepared to do so,” Trump said at a White House press briefing Friday.
Mexico had offered to cut production by 100,000 barrels per day , but OPEC wanted more of a sacrifice. So the U.S. agreed to fill in the gap and cut its production by 250,000 to 300,000 barrels per day , “which we’ve already done, by the way,” Trump said.
“U.S. production has already been cut , because we’re a market-driven economy , and oil is very market-driven,” he said. “They’ve been cutting oil all over the place.”
The U.S. is already on track for a production decline of 2 million to 3 million barrels per day , said Dan Brouillette , secretary of the U.S. Energy Department .
After a series of negotiations between OPEC members, U.S. President Donald Trump announced his country will help Mexico to fulfill an agreement that established all countries must cut their oil output to stabilize the market.
The agreement between Mexico and the U.S. came after Mexico’s Energy Minister refused to cut the country’s oil output by 400,000 bpd.
During a press conference held on April 4, Trump said: “President [López Obrador] and I spoke last night. They have a limit. OPEC nations agreed to a different limit. Cuts of 23% or so. (…) So what I will do, and I don't know if it will be accepted, we’ll find out, but the United States will help Mexico along and they’ll reimburse us at some later date when they’re prepared to do so.”
However, Trump did not disclose how or when will Mexico reimburse the United States after it agreed to cut their oil output by 250,000 additional bpd and meet Mexico’s quota .
Last weekend, Mexico’s President emphasized the importance of allocating more resources to Pemex and increase oil output.
When questioned about the deal with the U.S. President, Foreign Minister Marcelo Ebrard said Mexico did not commit to anything in specific.
Meanwhile, Energy Minister Rocío Nahle said the Mexican government does not have a concrete agreement with the Trump administration .
After Mexico reached an agreement with the U.S. and which was later accepted by the OPEC, Rocío Nahle thanked the organization.
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The price of crude is down by over 50% since the start of the year and while that helps consumers and energy-hungry businesses, it is below the cost of production for many countries and companies. That has strained the budgets of oil-producing nations , many of which are developing economies , and it has pushed private companies in the U.S. toward bankruptcy.
Analysts warn even these proposed cuts may not be enough to offset the loss in demand over the longer term, as the coronavirus pandemic has decimated demand for energy around the world.
“ COVID-19 is an unseen beast that seems to be impacting everything in its path,” OPEC Secretary-General Mohammed Barkindo said at the start of the meeting, according to a statement. “There is a grisly shadow hanging over all of us. We do not want this shadow to envelop us. It will have a crushing and long-term impact on the entire industry.”
More nations were expected to add to the effort, with Saudi Arabia chairing a Group of 20 virtual meeting between energy ministers on Friday to discuss the oversupply in the market. The meeting was expected to bring on board a wider number of countries, including the United States , as well as representatives of OPEC.
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