Mexico Comes Out on Top in OPEC+ Production CutBy Peter Appleby | Mon, 04/13/2020 - 14:18
The drawn-out OPEC+ production cut saga finished on Sunday with Mexico coming out the winner, as the country’s refusal to reduce its production by 400Mb/d was accepted by leading nations including Saudi Arabia. OPEC+’s collective cut of 9.7MMb/d will formally go ahead.
At Monday’s morning press briefing, Mexico’s President Andrés Manuel López Obrador celebrated his country’s success, saying that the “special treatment” Mexico received from the OPEC+ countries has “never been seen” before. Mexico’s Minister of Energy Rocío Nahle on Thursday adamantly rejected the group’s production cut demand on Mexico, which formed part of a collective effort to reduce output and stabilize the global oil market.
Minister Nahle had instead offered a cut of only 100Mb/d, while a personal deal struck between President López Obrador and US President Donald Trump would see the US cutting an extra 250Mb/d plus to cover Mexico’s requirement. Though the deal was confirmed by both presidents, it is not known whether it features in the final OPEC+ agreement.
Mexico’s success fits well into President López Obrador’s intentions for PEMEX. The president has already sworn to increase PEMEX’s production to 2.6MMb/d by the end of his term in 2024 and is spending US$8 billion on the Dos Bocas refinery. Recently, the president ordered a reduction of crude exports to increase the amount refined in-country and avoid “waste” during the period of low oil prices.
Having been involved in the negotiations, to put it mildly, the number that OPEC+ is looking to cut is 20 Million Barrels a day, not the 10 Million that is generally being reported. If anything near this happens, and the World gets back to business from the Covid 19.....— Donald J. Trump (@realDonaldTrump) April 13, 2020
An OPEC press release on Sunday stated the group’s agreement to “adjust downwards their overall crude oil production by 9.7MMb/d, stated on 1 May 2020, for an initial two- month period that concludes on 20 June 2020.” Months following will see the output reduction decrease to a final figure of 5.8MMb/d for a period of 16 months from 1 January 2021 to 30 April 2022.
US President Donald Trump tweeted his congratulations to Russia’s President Vladamir Putin and King Salman of Saudi Arabia for what he called a “great deal for all”. On Monday, the president followed up by stating that “OPEC+ is looking to cut 20MMb/d, not the 10MMb/d that is generally being reported.”
According to Amena Bakr of Energy Intel, Saudi Arabia’s oil minister said that the IEA will buy 200MMb of stock over the coming months and that the G20 will be cutting 3.7MMb/d. In total, some 19.5MMb will be taken out of the global market, Bakr said.