Russia and Saudi Arabia have called off their brutal price war and are now pushing dozens of major crude producers toward a deal that would slash production and help stabilize a market that’s been rocked by the coronavirus pandemic.
A marathon video conference between OPEC members and other major energy powers on Thursday ended with a tentative deal to reduce production by 10 million barrels per day in May and June, the deepest cut ever agreed by the world’s oil producers.
But there was a major snag: Mexico has declined to support the agreement, and meeting participants said acknowledged in a statement that final agreement is conditional on the country’s consent. Another round of talks between the Group of 20 is scheduled for Friday.
Earlier Thursday, a senior OPEC source told CNN Business that Mexico expressed reservations about the scale of their cut and the length of the agreement. While the most severe cuts are only scheduled to last until the end of June, production cuts in some form would last until 2022.
Even if the deal is finalized, the decline in production would amount to only about 10% of the world’s normal supply of oil, far below the estimates for how much demand for oil has collapsed in the wake of the corona virus crisis. And it is unlikely to stem the massive plunge in oil prices in recent months.