OPEC+ has said the proposed cut of 10 million barrels per day tentatively agreed after marathon talks would only happen with Mexico’s nod. The country, which is hellbent on boosting production, reportedly balked at the idea.
The body of world oil producers called on its members to “contribute to the efforts aimed at stabilizing the oil market” on Thursday night after marathon negotiations earlier in the day.
“The agreement that was reached depends on Mexico’s consent to accept the conditions specified in the annex,” the OPEC final statement read, as reported by TASS news agency.
Kuwait’s oil minister, Dr Khaled al-Fadil, has confirmed that Mexico’s position was the reason behind the group’s failure to churn out the much-awaited deal.
Mexico had “delayed the agreement” over the impasse on the suggested output cut, he tweeted.
Prince Abdulaziz bin Salman, Saudi Arabia’s Minister of Energy, urged Mexico to come on board, arguing that it would only gain from the deal.
“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,” he told Reuters.
When the G20 hosts a virtual meeting on energy on Friday, it is expected that the OPEC+ members will try to persuade Mexico to accept the deal in a last-ditch effort to finalize the agreement.
News of the spat came after reports suggesting a tentative deal had been reached, but Mexico’s reluctance to divert from plans to expand, rather than limit, oil output is feared to derail the agreement. Mexico’s state oil company, Pemex, has long resisted any cuts, instead moving ahead with a host of new drilling projects while looking to develop some 15 new sites.
During the negotiations, Mexico City said it would be willing to cut 100,000 bpd over the next two months – thus reducing output to 1.681 million bpd from 1.781 million bpd reported in March, the country’s Energy Secretary Rocio Nahle said in a tweet. OPEC, however, has reportedly asked for a reduction four times greater.
Overall, the organization has suggested reducing output by a total of 10 million bpd in May and June, easing the cuts to 8 million bpd until December, and then scaling them down further in the months following.
Oil prices declined abruptly on news of the deal falling through, after briefly surging earlier on Thursday over reports about a looming deal. WTI crude, a US benchmark, tanked more than 9 percent to $22.76 per barrel on Thursday night, while Brent crude fell just over 4 percent to $31.48 a barrel.
Petroleum has hit record-low price levels due to a ‘price war’ between Moscow and Riyadh – which saw Saudi Arabia boost production dramatically – in combination with sweeping lockdown measures around the globe to contain the lethal coronavirus. The rock-bottom prices prompted major producers to look to stabilize world oil markets through output reductions, but without unanimous agreement among members of OPEC+, the cuts won’t come into effect.