OPEC, Russia Reach Historic Agreement on Output
OPEC, Russia and other allies outlined plans on Thursday to cut their oil output by more than a fifth and said they expected the United States and other producers to join in their effort to prop up prices hammered by the coronavirus crisis.
But the group, known as OPEC+, said a final agreement was dependent on Mexico signing up to the pact after it balked at the production cuts it was asked to make. Discussions among top global energy ministers will resume on Friday.
“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,” Saudi Energy Minister Prince Abdulaziz bin Salman told Reuters by telephone.
The planned output curbs by OPEC+ amount to 10 million barrels per day (bpd) or 10% of global supplies, with another 5 million bpd expected to come from other nations to help deal with the deepest oil crisis in decades.
Global fuel demand has plunged by around 30 million bpd, or 30% of global supplies, as steps to fight the virus have grounded planes, cut vehicle usage and curbed economic activity.
Officials from the Organization of the Petroleum Exporting Countries and Russia have said the scale of the crisis required involvement of all producers.
“We are expecting other producers outside the OPEC+ club to join the measures, which might happen tomorrow during G20,” the head of Russia’s wealth fund and one of Moscow’s top oil negotiators, Kirill Dmitriev, told Reuters.
Thursday’s OPEC+ talks will be followed by a call on Friday between energy ministers from the Group of 20 (G20) major economies, hosted by Saudi Arabia.
OPEC and Russian sources said they expected other producers to add 5 million bpd to cuts, although an OPEC+ statement on Thursday made no mention of any such condition.
Brent oil prices, which hit an 18-year low last month, were trading around $32 a barrel on Thursday, half their level at the end of 2019.
OPEC+ would cut output by 10 million bpd in May to June, OPEC+ documents showed. All members would reduce output by 23%, with Saudi Arabia and Russia each cutting 2.5 million bpd and Iraq cutting over 1 million bpd.
Under the plans, OPEC+ would then ease cuts to 8 million bpd from July to December and relax them further to 6 million bpd from January 2021 to April 2022, the documents showed.
The United States, whose output has surged to surpass Saudi and Russian production, was invited to Thursday’s OPEC+ talks but it was not clear if it had joined the video conference. Brazil, Norway and Canada were also invited.
US officials have already said US output would fall naturally over two years but have not committed to any cuts.
Asked about other countries such as the United States, Canada and Brazil joining the OPEC+ cut pact, Prince Abdulaziz said: “They will do it in their own way, using their own approaches, and it is not our job to dictate to others what they could do based on their national circumstances.”
He added that he expects that other producers will join in the global effort to reduce oil supply to stabilize oil markets.