Major oil producers except Mexico agreed to cut production by 10 million barrels a day in May and June, OPEC said Friday, following marathon talks to parry a plunge in prices.
The videoconference led by the Organization of the Petroleum Exporting Countries was considered as the best opportunity to boost markets that wallowed in nearly two decades of lows due to the ongoing global health crisis and a trade war between economic powerhouses Saudi Arabia and Russia.
The impasse casts doubt upon attempts to resuscitate the market from a crippling recession caused by the coronavirus. The agreement by the OPEC+ community of nations, which dwarfs previous actions and has been supported by the Trump administration, intends to end the price war between Riyadh and Moscow, which in nearly 20 years has helped drive oil down to its lowest.
Mexico's energy minister Rocio Nahle Garcia's reluctance to acknowledge the planned cuts reflects her country's willingness to stay as close to the production and expenditure plans it pursues despite the collapse.
To balance their budgets and avoid tapping into their currency reserves, both Russia and Saudi Arabia are vitally involved in higher rates. At the current price point, Russia can last 5-7 years and Saudi Arabia can last no more than 3 years, as oil accounts for 80 percent of Saudi's revenue.
The virtual meeting of Riyadh-dominated OPEC countries and their OPEC+ allies like Russia, as well as other main non-members, began just after 1440 GMT on Thursday.
Discussions dragged on until Friday's early hours. The biggest sticking point mentioned by Bloomberg News was Mexico's refusal to sign up to its share of the cuts under the deal, which would have been 400,000 barrels a day.
Oil prices have fallen by 50 percent this year as the pandemic coincided with a brutal price war that has seen producers flood the market. On Thursday, Brent fell 4 percent to $31.48 per barrel, just as the deal started to take shape. Because of the Good Friday holiday, there is no trading Friday in New York or London.
The Mexican energy minister tweeted she had proposed a reduction of 100,000 barrels for her country. Another virtual meeting is expected to take place on June 10 "to assess further steps as necessary to balance the market," said OPEC.
The unforeseen setback does not alter the urgent need to minimize the demand for the Organization of Petroleum Exporting Countries and its allies. This year's dramatic crash of oil has endangered oil-dependent nations' stability, pressured big corporations including Exxon Mobil Corp. to rein in spending and compromised the survivability of small independents.
