Just 24 hours after the OPEC + countries reached an agreement to reduce their oil production by 23%, conditioned on the acceptance of a cut by Mexico, the G20 energy ministers held a long meeting on Friday that concluded no progress in the covenant.
The global coronavirus pandemic and the price war that started in March between Russia and Saudi Arabia after failing to reach a consensus to keep reductions in crude production under OPEC + have pushed the cost of a barrel down to its lowest level by two decades.
However, despite the fact that a commitment was reached within the framework of OPEC + on Thursday to keep supplies limited for two years, with an initial reduction of 10 million barrels for May and June, producers still have differences.
These differences meant that the final declaration of the G20 meeting did not come out until 11 hours after the start of the telematic meeting and that the text only included formalities of promise of commitment and no concrete progress.
The communique of the meeting reflects the coincidence among the G20 countries in the need to ensure stability to energy markets for the well-being and endurance of all countries in all phases of recovery from the current crisis.
They also reiterate their commitment to work together “in a spirit of solidarity” to achieve concrete and immediate actions in this unprecedented moment of international emergency.
“We recognize the commitment of some producers to stabilize energy markets. We warn of the importance of international cooperation to ensure the resistance of energy systems,” they point out in the most striking part of a text full of generalities.
Some of them have already been expressed by the Minister of Energy of Saudi Arabia, Abdel Abdulaziz bin Salman, who warned in his inaugural speech that for the world economy to recover, an “affordable” energy supply will be needed.
The agreement reached on Thursday by OPEC + represents a commitment to keep supplies limited for two years, with a phased plan: the 10 mbd reduction would take effect in May and June next, it would drop to 8 mbd between July and December, and to 6 mbd between January 2021 and April 2022.
The entry into force of the pact was made conditional last night on the participation of Mexico, which today joined the initiative but with a far cut of the 400,000 barrels that was requested, a discrepancy that was planned on Friday about the G20 meeting.
The Mexican president, Andres Manuel Lopez Obrador, assured this Friday that his country has joined the pact but with a decrease of only 100,000 barrels per day and after also agreeing with the United States, that in compensation it will lower its production a little more.
The OPEC countries disagree with this reduction and have let out their disappointment.
In statements collected by the state chain Al Ijbariya, the Saudi energy minister called on the G20 and Mexico, whose participation was conditioned last night by the OPEC + agreement, to “take exceptional measures for the stability of the oil market.”
Russian Energy Minister Alexander Novak said in statements to Russian state television that he expects an additional cut of 5 million barrels per day by oil-producing countries that are not part of OPEC +.
Saudi Arabia and Russia had engaged in a price war after Moscow refused to extend the plan to cut oil production by 1.5 million barrels that expired at the end of March, and they appear to have already overcome their differences. Now it remains to overcome those of others.