NEW DELHI: Plummeting crude oil prices are finally set to receive some support with the OPEC+ group of oil exporters agreeing to a record 10 million barrels per day output cut to prop up demand. While Mexico’s reluctance to sign on to the agreement put a spanner in the works during the late night meeting on Thursday, the country’s President announced on Friday that he has now agreed to an output cut deal with US President Donald Trump.
According to oil market analysts, this should help crude oil prices gain some value while reducing the strain on already overloaded global oil storage facilities. The brief but impactful price war between Saudi Arabia and Russia, combined with the demand destruction caused by the Covid-19 pandemic, has sent crude oil prices to multi-decade lows over the past few weeks.
Brent crude prices fell to as low as $22.76 a barrel in March before recovering to above $30 a barrel as hopes for an OPEC+ deal and a rapprochement between Russia and Saudi Arabia rose. Brent crude closed the week at $31.48 per barrel.
During Thursday’s virtual meeting between the world’s oil exporters, Saudi Arabia and Russia agreed to effect supply cuts but were stymied by Mexico, which refused to agree to cut its production by the called-for 400,000 barrels a day under the proposed deal.
On Friday, however, Mexican President Andrés Manuel López Obrador, said he had agreed with Trump that the United States will compensate what Mexico cannot add to the proposed cuts.
According to Obrador, Mexico will cut its oil production by 100,000 barrels per day from its current level of 1.7 million barrels a day and the US will expand its output cut by another 250,000 barrels per day to make up for Mexico’s share.
According to the deal agreed to by the Saudi Arabia-led OPEC and other major oil exporters like Russia and the US, all parties to the agreement will make output cuts worth a cumulative 10 million barrels a day until the end of July, followed by an 8 million barrels per day cut until the end of 2020.