A historic multilateral deal to lower global oil production and stabilize prices, led by record cuts from Saudi Arabia and Russia, is at risk as Mexico refuses to agree to the proposed curbs.
The impasse threw into doubt efforts to revive the market from a debilitating coronavirus-induced slump.
The deal by the group of nations known as OPEC+, which dwarfs previous interventions and has been encouraged by U.S. President Donald Trump, is also aimed at ending the price war between Riyadh and Moscow that helped pushed oil down to the lowest in almost two decades.
The deal is conditional on the consent of Mexico, which was the only participant not to agree to the proposal, OPEC said in a statement released after more than nine hours of talks via video link Thursday.
The group doesn’t intend to meet again Friday, and will instead focus talks on a Group of 20 gathering scheduled that day, according to a delegate.
The tentative deal would result in cuts of about 10 million barrels a day during May and June. Saudi Arabia and Russia, the biggest producers in the group, would each take output down to about 8.5 million a day, with all members agreeing to cut supply by 23%, one delegate said.
The refusal by Mexico’s Energy Secretary Rocio Nahle Garcia to accept the proposed cuts reflects her country’s determination to keep as close as possible to the production and spending plans it’s been pursuing despite the crash.
In a Twitter post shortly after leaving the meeting, she said the nation is ready to reduce output by 100,000 barrels a day, far less than the 400,000 barrels a day proposed by the group, and from a higher baseline.
Attention now turns to the G-20 energy ministers meeting Friday, where countries outside OPEC+, including the U.S. and Canada, could contribute as much as 5 million barrels a day of additional reductions.
The unexpected setback doesn’t change the urgent need for the Organization of Petroleum Exporting Countries and its allies to reduce production.
Crude’s spectacular crash this year has threatened the stability of oil-dependent nations, forced major companies such as Exxon Mobil Corp. to rein in spending and risked the existence of small independents.
