Opec+ reaches agreement to cut oil production by 10m barrels a day

Opec+ reaches agreement to cut oil production by 10m barrels a day

Attention now turns to today's meeting of G-20 oil ministers, chaired by Saudi Arabia, where countries outside OPEC+, including the USA, are expected to make commitments to support oil markets.

Following the meeting, Mexico's Secretary of Energy Rocío Nahle said in a tweet that the country would be willing to cut production by 100,000 barrels per day for the next two months.

Trump also spoke Friday with President Vladimir Putin of Russian Federation about the latest efforts to combat the coronavirus pandemic and maintain stability in global energy markets, said White House spokesman Judd Deere.

OPEN Plus member Mexico, however, balked at the reduction.

"Our global energy systems, from producers to consumers, is in uncharted territory and it is our responsibility to find the path forward", Saudi Energy Minister Prince Abdulaziz bin Salman told the G20 gathering.

But efforts to conclude the OPEC+ deal hit the buffers when Mexico insisted it would only cut its output by a quarter of the amount demanded by OPEC+, although Mexico's president said Washington had offered to make extra cuts on his behalf. Trump, meanwhile, has said his country's cut will happen "automatically" as low prices put the shale patch in dire straits.

The collapse in oil prices has gutted state revenues for Nigeria, Africa's most populous nation, as exports are one of its key earners.

They argue that eventually, despite the agreement, millions of barrels of oil will not find customers and will inevitably be stored, pushing the already oversupplied market to tumble deeper.

A global pact to stem the biggest rout in oil prices for nearly two decades has been all but sealed as the Opec cartel and its key allies agreed to slash production by 10 million barrels a day.

"The United States in discussions last night with Mexico, Saudi Arabia, Russia and dealing with OPEC nations, we're trying to get Mexico "over the barrel", as the expression goes".

He said Mexico was first asked to cut 400,000 barrels per day and then 350,000 barrels per day.

American benchmark West Texas Intermediate (WTI) climbed as much as $26.45 a barrel during Thursday trading to close at $25.09 per barrel, but it was down to $23.21 a barrel at the same time, a 7.5% loss.

Analysts say Russian Federation refused to back even a moderate cut because it would have only served to help USA energy companies, which were pumping at full capacity. The group is planning another videoconference June 10 to discuss what additional measures need to be taken.

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.

The size of the reduction highlights the depth of the market's crisis.

"Should the current corona restrictions persist in the world economic environment, demand for oil will drop to an extent that whatever Opec+ proposes will barely manage to put a stable floor on prices, let alone achieve a stronger medium and longer-term valuation", he said.

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