OPEC+ agrees on oil cut and awaits for Mexico

The ministerial meeting of the OPEC+ alliance and other oil producers ended on Friday without a final agreement on the major cut in oil production they were negotiating to stabilize the market, after Mexico withdrew from the negotiations.

After eleven hours of negotiations via videoconference, “the parties could not reach an agreement,” said the Ministry of Energy of Kazakhstan in a statement, which indicates that “it does not lose hope that in the future a consensus will be reached on a collective reduction of oil production (...)”.

The talks will continue this Friday, in the framework of the G20 meeting, and the OPEC+ alliance hopes to be able to convince Mexico to join a new cutback agreement, sources from one of the delegations that participated in the telematic meeting told Efe.

The spokeswoman of the Ministry of Energy of Azerbaijan, Zamina Alieva, told Efe that the draft agreement, which provides for a reduction of 10 million barrels per day (mbd), will be final if Mexico agrees to reduce its oil production by 400,000 barrels. “Otherwise, the agreement will not enter into force,” she said.

Mexico withdrew from the meeting without giving its consent to a new agreement. According to the Russian agency RIA Nóvosti, the problem was the divergence in positions around the base level of the reduction in oil production planned for the country.

According to the draft agreement to which the official agency TASS had access, Russia and Saudi Arabia must reduce their production by 2.5 million barrels per day in equal parts from a level of 11 million barrels. Thus, in May and June, the production of these two oil giants should be 8.5 million barrels a day.

The countries of the OPEC+ alliance must limit their production by 10 million barrels a day, from 43.8 million to 33.8 million. For each country participating in the cut, production must be reduced by 23%.

The aim is to keep supplies limited for two years, albeit with slight staggered increases: from 1 July next until 31 December, the 10 mbd cut planned for May and June is reduced to 8 mbd, and to 6 mbd between January 2021 and April 2022.

The OPEC partners Venezuela, Iran and Libya will remain exonerated from the commitment to limit their extractions due to the involuntary falls in their oil activities for various reasons.