Top oil countries struggled to conclude record cuts in G20 talks Friday to boost prices hit by the coronavirus crisis, due to Saudi conflict with Mexico despite US efforts to mediate.
Bringing together the OPEC + group led by Saudi Arabia and Russia, their allies signed an agreement on Thursday as 10 million barrels per day (bpd) or 10% of global supply to cut crude oil production.
Russia and OPEC said they want other producers to cut 5% more, including the US and Canada.
But tensions broke out when efforts to conclude the deal announced that Mexico would cut only a quarter of the amount requested by OPEC +.
Hours after the talks ended, a G20 communiqué did not mention cuts or quantities, but only referred to “measures to ensure energy market stability”. How the OPEC + pact can now be concluded remains uncertain.
Mexico said the U.S., with fear of OPEC, offered an extraordinary U.S. cut on its behalf as an unusual offer. The US, which threatened Saudi Arabia with oil tariffs if the market did not solve the over-supply problem, said it could help Mexico, who was reluctant about the planned cuts. However, he did not say how it would be.
Mexico said it offered OPEC + only a cut of 100,000 bpd, not 400,000 bpd. However, also mentioned that United States is committed to supporting them for an additional 250,000 (bpd) cuts.
Without an official statement, it was said that the United States would provide a natural drop in oil production driven by economic forces, and that US production could fall between 2 million and 3 million bpd by the end of 2020.
It is understandable that US laws prevent American manufacturers from participating in any price cartel. However, the attendance in an overall action is becoming inevitable.
Oil markets closed on Friday, but prices did not go up after talks on cuts of Thursday. Because even an unprecedented 15% cut in global supplies projected by OPEC + is insufficient against the 30% drop in demand.