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Mexico agrees to slash 100,000 b/d in deal with OPEC brokered by Trump

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Mexico agrees to slash 100,000 b/d in deal with OPEC brokered by Trump

Highlights

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London — Mexico has agreed to cut 100,000 b/d of its crude oil production as part of an OPEC+ pact to take 10 million b/d of global supply off the market, following the intervention by US President Donald Trump to heal a rift in the group, Mexican President Andres Manuel Lopez Obrador said Friday.

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Mexico had been at loggerheads with Saudi Arabia, Russia and the rest of the OPEC+ alliance over its quota under the deal, dragging out negotiations for more than nine hours Thursday.

Sources said a flurry of phone calls overnight involving Trump and other US officials after the OPEC+ talks fell apart may have helped broker a compromise, though several OPEC+ delegates told S&P Global Platts that they had not heard of any deal.

"[OPEC+] asked us for a 23% reduction like that of Saudi Arabia," Lopez Obrador said at a press conference. "They asked us for 400,000 barrels less and then 350,000 barrels less. President Trump spoke with us and an agreement of 100,000 barrels was reached."

Mexico's production quota would be 1.686 million b/d under the agreement, he said, down from a 1.776 million b/d average in March.

Lopez Obrador added that the US had agreed to take on the rest of Mexico's cut obligation and to lower its production by 250,000 b/d beyond whatever commitment it was prepared to make. It was unclear what he meant, as sources briefed on the US plans said the country is not willing to institute mandatory production cuts.

US Energy Department officials Friday morning were still in talks with Mexico, but no deal had been finalized, according to a source familiar with the discussions.

The US is not part of the OPEC+ alliance, but Trump has pressured Saudi Arabia and Russia, the two largest producers in the group, to end their price war and forge a landmark pact on output cuts to help bolster the ailing oil industry -- a key constituency for the president's electoral prospects.

G20 MEETING

Lopez Obrador's comments came just ahead of a G20 energy ministerial meeting, where the OPEC+ alliance plans to present its 10 million b/d production cut accord and seek additional contributions from other countries.

At that meeting, US Energy Secretary Dan Brouillette committed to the US storing "as much oil as possible" in the Strategic Petroleum Reserve, but made no further commitments for US supply cuts, according to his prepared remarks, sent out Friday morning by his agency.

DOE has plans to offer as much as 77 million barrels of storage space to US producers in its SPR system along the Gulf Coast. A plan to buy US crude for the SPR was blocked by Democrats in Congress.

Brouillette's remarks were prepared before the OPEC+ deal had been agreed to since he said it was "extremely disappointing" the deal had not materialized.

"This is a time for all nations to seriously examine what each can do to correct the supply/demand imbalance," he said.