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OIL: Trump’s much-promised deal fell apart

The G-20 energy ministers have failed to agree on a cut in oil production, a statement released after long negotiations on Saturday said no cuts.

Talks dragged on Friday to try to reach an agreement on a massive drop in oil production, previously blocked by Mexico.An agreement between the United States and Mexico to help Mexico meet the reduction quota demanded by producers seemed to remove an obstacle to a comprehensive agreement.

The final press release published after the end of the virtual summit organized by Saudi Arabia, the world’s largest oil exporter, includes commitments for future cooperation in the fight against the COVID-19 pandemic, but does not mention no drop.

“We are committed to ensuring that the energy sector continues to make a full and effective contribution to defeating COVID-19 and enabling the global (economic) recovery that must follow,” the ministers said in this text.

“Immediate actions”

“We are committed to working together in a spirit of solidarity on immediate and concrete actions to address these problems in a time of unprecedented international emergency,” they said.

“We are committed to taking all necessary and immediate measures to ensure the stability of the energy market,” said the G20 ministers.

Due to the confinement of half the world’s population to limit the pandemic of the new coronavirus, demand for oil is plummeting, even though supply is already in surplus.

The Organization of the Petroleum Exporting Countries (OPEC) said on Friday morning a preliminary agreement on a reduction in world supply of 10 million barrels of crude per day (mbd) in May and June.

The agreement was reached at a meeting of the main oil-producing countries, including Russia, which is not a member of OPEC but the world’s second-largest producer and leader of the cartel partners.

But Mexico, also a non-OPEC member, had not given its approval, which was essential to ratify the agreement at this meeting. Mexico City found the effort demanded of it excessive (production reduction of 400,000 barrels per day) excessive, compared to other countries.

American-Mexican Agreement

A few hours later, Mexican President Andrés Manuel Lopez Obrador said that he had reached an agreement with his American counterpart, Donald Trump, to reduce oil production in his country.

He said that Mexico would reduce its pumping by 100,000 barrels per day (bd) and that the United States would reduce theirs by 250,000 bd more than their previous commitments, to compensate for the Mexican share.

Trump then confirmed that the United States had agreed to help Mexico reach its reduction quota. “We agree to lower production. And they agree to do something to compensate us for the future, “said the American president.

But the US-Mexico deal failed to reach a decision to cut production during discussions by G20 energy ministers.

Diplomatic efforts

Diplomatic efforts had increased, however, to try to reach an agreement.

Donald Trump had discussed Friday with his Russian counterpart Vladimir Putin on “the latest efforts to fight the coronavirus pandemic and maintain stability in the world energy markets”, according to the White House.

At the G20 meeting, Russian Energy Minister Alexander Novak urged his counterparts to act in a spirit of “partnership” and “solidarity”, according to a television.

Saudi Arabia urged, through its Minister of Energy, Prince Abdelaziz bin Salman, “all G20 members, including Mexico, as well as the invited countries, to take appropriate and extraordinary measures to stabilize the market”.

And the executive director of the International Energy Agency (IEA), Fatih Birol, said he hoped the meeting could lead to “much-needed stability in the oil markets.

“The extreme volatility in the markets is hurting the global economy when we can least afford it,” he said.

To organize the extraordinary meeting of the main producing countries, Riyadh and Moscow had put an end to the price and market war that they had started after their last conference on March 6 in Vienna.