There appears to be no respite for the oil crisis, despite the announcement of a deal by Organization of Petroleum Exporting Countries (OPEC) and its allies (OPEC+) for output cut, in order to help stabilise the market.
A report from Bloomberg indicates that the global deal for an oil output cut, which was initiated to stop the historic crude oil price crash, appears to be in danger, and negotiators are racing against time to reach an agreement, with only a few hours left before the market opens.
This is happening as the diplomatic row between Saudi Arabia and Mexico enters its fourth day, with a group of OPEC+ ministers expected to speak at 5 p.m. London time. Some of the delegates, however, pointed out that some progress had been made, with Russian officials warning that there would be unmanageable chaos if the negotiations failed.
Though some OPEC+ member countries had suggested removing Mexico from the group, the Energy Minister of Saudi Arabia, Prince Abdulaziz Bin Salman, said that the whole agreement is hinged on Mexico agreeing to the deal.
The official spokesperson for the Russian President, Dmitry Peskov, said, “The whole world needs this deal.”
Backstory: In a virtual meeting on Thursday, OPEC and its allies agreed to an output cut of 10 million barrels a day for OPEC member countries and 5 million barrels per day for some major oil-producing countries. Subsequently, Mexico, rejected the oil output cut of 400,000 barrels per day which was allocated to it, as its delegates had proposed that they are only willing to absorb a 100,000 per day output cut.
This had been preceded by the oil trade war that went on between Russia and Saudi Arabia.
The crash in crude oil prices globally stems from the glut in supply and low demand due to the shutdown of the global economy as a result of the coronavirus pandemic.
However, according to delegates, most OPEC+ member countries are backing US President, Donald Trump’s compromise with Mexico in order to facilitate the 10 million barrels per day output cut, even if they acknowledge that it’s a face-saving measure that does not necessarily translate to actual cuts.
In a related development, the G-20 said that it would take all the necessary measures to maintain a balance between oil producers and consumers, but it made no commitment toward specific steps on production cuts.