international magazine
13-04-2020 10:08


OPEC+ ALLIANCE ENDORSED NEW DEAL TERMS



OPEC+ ALLIANCE ENDORSED NEW DEAL TERMS

All 23 countries participating in the OPEC+ alliance agreed on a cumulative reduction in oil production by 9.7mn b/d. According to a statement by the Iranian oil ministry on its official Twitter page, the validity of this cut is May-June.

This decision was made at a new OPEC+ meeting on the final approval of the deal to reduce oil production. In turn, the adviser to the Minister of Energy of Azerbaijan Zamina Aliyeva explained that the alliance agreed to the conditions of Mexico.

“The 10th Meeting of OPEC and Non-OPEC Ministers, in a video conference format, approved the “Declaration of Cooperation” in order to reduce daily oil production. The meeting considered and accepted the OPEC+ proposal to cut daily oil output in Mexico by 100,000 b/d,” the spokeswoman said.

“According to the amendments to the “Declaration of Cooperation”, production cuts in Mexico were set at 100,000 b/d in May-June instead of 400,000 b/d. It was decided that the United States would cut their production by another 300,000 b/d in order to compensate for the remainder of Mexico commitment,” Aliyeva explained.

“In this way, an unanimous agreement was reached to implement the decision to cut the daily oil production at OPEC+ from May 1 by 9.7mn b/d,”Azerbaijan Energy Minister adviser concluded. At the same time, a source in one of the delegation of the alliance told RIA Novosti, there was no idea yet what would be Mexico production cut after June.

OPEC + AND G20 - NO SPECIFIC FIGURES

It is also worth add that despite the expectations the OPEC + did not get much support from the G20. According to Argus Media,

President Donald Trump said on Friday 10 April the US would help Mexico meet its obligation to cut production under the tentative Opec+ agreement, paving the way for formalizing the accord between Opec and other major producers.



"We are trying to get Mexico, as the expression goes, over the barrel," Trump said. "The US will help Mexico along and they will reimburse us some time at a later date when they are prepared to do so."

Mexico held up the finalization of the agreement on 9 April, balking at the request to cut production by 400,000 b/d — 23% — in May-June from a baseline of 1.75mn b/d.

Mexico's president Andres Manuel Lopez Obrador said on Friday 10 April Mexico would cut production by 100,000 b/d, adding that Trump has offered to reduce US crude output by an additional 250,000 b/d to compensate for Mexico's inability to do so.

Trump confirmed the discussion and the pledge — but not the actual form the putative US production cut will take. The US has refused to undertake any formal pledges ahead of Opec+ discussions. US energy secretary Dan Brouillette told his G20 colleagues on Friday 10 April that US crude output could decline by as much as 3mn b/d as he encouraged Opec+ members to finalize a tentative deal to cut output by 10mn b/d for two months from 1 May.

Helping Mexico meet its obligations means some production cuts by the US, Trump said, but added that "the US production has already been cut because we are a market-driven economy and oil is very market-driven."

Pressed to explain just what the US has undertaken to do, Trump demurred. The US will cut 250,000 b/d, he said, "which is what we already have done."

The White House declined to provide details on what mechanism the US will use to implement Trump's promise to the Mexican president. And Trump said the offer was yet to be accepted by other Opec+ producers. Mexico will "hold firm" on its offer, energy minister Rocio Nahle said at the conclusion of the G20 meeting.
Trump has been working to broker the deal between Opec+ countries, holding telephone discussions with Russian president Vladimir Putin and Saudi King Salman bin Abdulaziz to finalize the production cuts. Putin separately held talks with Saudi crown prince Mohammad bin Salman to close the deal, the Kremlin said.

Unlike the production cuts expected of the Opec+ group, the declines touted by the US and Canada will materialize over time as a result of deep cuts to drilling budgets.

Russian energy minister Alexander Novak said Friday, 10 April, at the conclusion of the G20 ministerial, that the Opec+ group expects the other major producers to implement 5mn b/d in production cuts by May-June.
However Canadian natural resources minister Seamus O'Regan pushed back on Novak's comments, insisting that "no numbers were discussed" at the G20 meeting.

Canada is not prepared to offer any production cuts since the federal government is not legally equipped to order them, O'Regan said. But the G20 will form a task force to help Opec+ members track production declines and market-balancing moves by other countries, he said.

The US and other large consuming nations also offered to open their strategic petroleum reserves to absorb some of the excess production, even though no more than 85mn bl of crude storage is available across the OECD countries.