Amid falling global prices, US and Mexico agree to cut crude oil output

The OPEC nations have agreed to "a different limit reduction of about 23 per cent", said US President Donald Trump

The United States and Mexico have decided to slash crude oil production to reduce global supply under an agreement among Oil and Petroleum Exporting Countries (Opec), US President Donald Trump said on Friday.

The Opec members and other oil-producing countries want to reduce oil production as the ongoing global health crisis in the wake of the coronavirus outbreak have heavily suppressed oil demand.

The Opec nations have agreed to "a different limit reduction of about 23 per cent", Trump said at his daily White House news conference on coronavirus.
 

During a virtual meeting of the Opec and non-Opec nations on Thursday, the major producers said the oil output would be cut by 10 million barrels per day in May and June.

The agreement will see another cut by eight million bpd from July to December, but it depends on Mexico's consent to take effect.

"Mexico is going to reduce by 100,000 barrels and that would mean that they're 250 to 300 (thousand) barrels short. We'd make up the difference, they would reimburse us at a later date," Trump said, adding that accomplishing that would involve cutting "some US production.

Trump said he spoke with leaders of Saudi Arabia and Russia and played a key role in Opec reaching the deal to cut down their oil production.

Trump said he had proposed to 'help Mexico along' in order to allow Mexico to make less stringent reductions.

Mexican President Andres Manuel Lopez Obrador, who has made increasing oil output one of the priorities of his administration, said US President Donald Trump had spoken to him on Thursday and offered to help.

Obrador's announcement of US cuts came as a surprise, given Trump's past reluctance to ask for coordinated cuts by US oil producers. 

During their call last night, Trump marveled at how Mexico was the only holdout to the deal, Lopez Obrador said.

"When I told him that it was 100,000 (barrels) and we couldn't do any more, he very generously said to me that they were going to help us with the additional 250,000 to what they are going to contribute," he said. "So for that I thank him."

But Russia and Saudi Arabia have entered into a price war with both the countries ramping up their production, leading to the oil prices plunging to a historic low.

The Opec, in a statement, said the cuts would down to eight million barrels a day for the rest of the year and beginning January 2021, it would be further lowered to 6 million barrels a day till at least April 2022.

Mexico, however, refused to agree to its share of cuts which could have been 400,000 barrels per day.

We are trying to get Mexico as expression goes over the barrel and Mexico is committing to do 100,000 fewer barrels.

"The (Mexican) President ([Lpez Obrador), and I spoke last night. We have a great relationship and great friendship they're helping us very much at the border. They have 27,000 Mexican soldiers on our border right now stopping people from coming into our country as our wall goes up. We've up to about 168 miles of wall, Trump said.

And in speaking with the President they have a limit; the Opec nations have agreed to a different limit reduction of about 23 percent. So what I thought I would do -- and I don't know that it's going to be accepted -- we will find out the United States will help Mexico along and they will reimburse us some time at a later date when they are prepared to do so, and we had a great conversation, but we will find out how that all works out, he said.

They are trying to get rid of the glut of oil -- there is a tremendous glut of oil -- and we don't want anything to hurt our incredible industry. We actually are the largest producer in the world now, so we don't want anything to hurt those jobs, those great jobs in Texas and North Dakota and Oklahoma and everywhere, he added.

We have a tremendous energy... tremendous energy business with New Mexico, and we want to keep those jobs, so we are working on it. I think eventually it's going to work out, may work out quicker than what most people thought possible, and maybe it won't, but it will work out eventually, Trump said. 

Oil prices have been wallowing near two-decade lows due to the coronavirus pandemic and a price war between key players Saudi Arabia and Russia.

During a virtual meeting of the Opec and non-Opec nations on Thursday, the major producers said the oil output would be cut by 10 million barrels per day in May and June.