Breaking News
Investing Pro 0
Cyber Monday SALE: Up to 54% OFF InvestingPro+ CLAIM OFFER

Saudi-Mexican clash halts record oil cut deal despite Trump pressure

Commodities Apr 10, 2020 07:25PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. A view shows branded oil tanks at Saudi Aramco oil facility in Abqaiq 2/2
 
LCO
-2.76%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Vladimir Soldatkin, Alex Lawler and Rania El Gamal

MOSCOW/LONDON/DUBAI (Reuters) - Top oil nations struggled to finalise record output cuts at G20 talks on Friday to boost prices slammed by the coronavirus crisis, as Saudi Arabia clashed with Mexico despite U.S. President Donald Trump's mediation offer.

OPEC led by Saudi Arabia and its allies led by Russia, which together make up the informal OPEC+ group, had forged a pact to curb crude production by 10 million barrels per day (bpd) or 10% of global supplies in marathon talks on Thursday.

Russia and OPEC said they wanted other producers including the United States and Canada to cut a further 5%.

But efforts to conclude the deal hit the buffers when Mexico said it would only cut output by a quarter of the amount demanded by OPEC+.

Measures to curb the spread of the coronavirus have destroyed demand for fuel and driven down oil prices, straining budgets of oil producers and hammering the U.S. shale industry which is more vulnerable to low prices due to its higher costs.

Mexico President Andres Manuel Lopez Obrador said on Friday Trump had offered to make extra U.S. cuts on his behalf, an unusual offer by a president who has long railed against OPEC.

Trump, who had threatened Saudi Arabia with oil tariffs if it did not fix the market's oversupply problem, said Washington would help Mexico by picking up "some of the slack" and being reimbursed later. He did not say how this would work.

But the offer was still not enough to close the deal.

Two sources familiar with the discussions said Saudi Arabia clashed with Mexico on Thursday and again on Friday, when the kingdom hosted talks of energy ministers from the Group of 20 major economies that were aimed at endorsing OPEC+ efforts.

Hours after talks ended, a G20 communique made no mention of the cuts or quantities, but only referred to "measures to ensure energy market stability". It remained unclear how the OPEC+ pact could be now finalised.

"We call on all nations to use every means at their disposal to help reduce the surplus," U.S. Energy Secretary Dan Brouillette had told the G20 talks.

Brouillette said the United States would offer supporty with a natural decline in its oil output driven by economic forces. Although not a formal cut, it still represents a major shift for by a country which has never joined OPEC in coordinated action.

Brouillette said U.S. output could fall by between 2 million and 3 million bpd by the end of 2020 - a bigger drop over a shorter period of time than officials previously indicated.

(Graphic: Crude oil prices vs U.S. crude oil stocks - https://fingfx.thomsonreuters.com/gfx/ce/dgkplangvbx/CrudevsOilStocks.png)

MARKET CRISIS

Kremlin spokesman Dmitry Peskov said action involving others was "unavoidable", even though he acknowledged U.S. law barred American producers from joining any price cartel.

Trump and Russian President Vladimir Putin held talks on Friday that included discussing the energy market.

Oil markets were closed on Friday but prices failed to rally after Thursday's talks on cuts, because even an unprecedented cut of 15% in global supplies, as envisaged by OPEC+, would still leave a huge overhang when demand has plunged 30%.

The Mexican president said Mexico offered OPEC+ a cut of just 100,000 bpd, not the 400,000 bpd demanded, but said Trump had "very generously said to me that they were going to help us with the additional 250,000 (bpd)" of cuts.

Mexico, which has long been in a standoff with Washington over Trump's plan to build a wall between the two countries, cares less about low oil prices and more about volume because of its hedging programme, which protects it against price falls.

The crisis in the oil market has pushed Russia and Saudi Arabia to patch up differences after their acrimonious OPEC+ meeting in March where a dispute over how best to tackle falling prices led them to scrap their existing pact on production restraint that had helped balance the market for three years.

The new OPEC+ deal envisaged all members reducing output by 23%, with Saudi Arabia and Russia each cutting 2.5 million bpd and Iraq cutting over 1 million bpd in May and June.

Riyadh and Moscow agreed that their cuts would both be calculated from an October 2018 baseline of 11 million bpd, even though Saudi supplies surged to 12.3 million bpd this April.

Under the plans, OPEC+ would ease cuts to 8 million bpd from July to December and relax them further to 6 million bpd between January 2021 and April 2022, OPEC+ documents showed.

Norway and Canada, both outside OPEC+, have suggested they could cut if the deal was implemented.

UBS said the cuts were still not enough. "We still see Brent falling to $20 per barrel or lower in the second quarter of 2020," it said.

(Graphic: OPEC+ 10 million bpd cut distribution for May-June - https://fingfx.thomsonreuters.com/gfx/ce/xegvbqrgpqz/OPEC10mlncut.PNG)

Saudi-Mexican clash halts record oil cut deal despite Trump pressure
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (34)
Idar Polden
Idar Polden Apr 12, 2020 6:23AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
US is the biggest oil producerprod
Idar Polden
Idar Polden Apr 12, 2020 6:23AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Then comes Saudi, Russia and Canada as number 4. If us and Canada cut the sane as Saudi and Russia we will go from 10.. to more than 18.. in cuts
Robert Stoltz
Robert Stoltz Apr 12, 2020 1:30AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
nobody buys oil, so low oil prices are good for consumers. it's the stock company stock price we want, and in America, it's nowhere to be seen.
stephan wolf
stephan wolf Apr 11, 2020 4:37PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Pinocchio and his republitards need to back off and let the market sort itself out.
stephan wolf
stephan wolf Apr 11, 2020 4:36PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
What happend to free market ? 🖕🏻
Luis Angulo
Luis Angulo Apr 11, 2020 9:27AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
México hires a hedge if the oíl prices fall... Why would México lower the production?
TeaMaker Tex
TeaMaker Tex Apr 11, 2020 8:23AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Another weak headline attempting to sway markets.
Ronald Warren
Ronald Warren Apr 11, 2020 7:53AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
This is an easy fix. Call Powell / The Fed will be happy to purchase all oil surpluses with the same funny money they're buying stock with. The Fed will buy the Universe!!
Get Sirius
Get Sirius Apr 11, 2020 7:53AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
True
Carrascal Eduardo
Edouard Apr 11, 2020 6:49AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
We will see 15$ per barrel sammme time ahead
Tutor Joseph
Tutor Joseph Apr 11, 2020 5:49AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
OIL TO FALL BACK TO USD20 https://oilprice.com/Energy/Oil-Prices/Oil-Could-Fall-Back-To-20.html
jemin An
jemin An Apr 11, 2020 5:25AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I think price will go down in Monday, the volume of cut is not satisfying market, disappoint with no option remained.
Idar Polden
Idar Polden Apr 11, 2020 5:25AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
us and Canada is expected to follow up. if they do it will go up otherwise down.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email