Oil: Russians and Saudis reach agreement and Mexico disapproves

Last Thursday (9), Saudi Arabia and Russia agreed to carry out cuts in their oil production – measure aims to reduce the impacts arising from the coronavirus crisis. However, a few hours later, Mexico abruptly dropped out of the negotiations. Such action worries the oil market, as it jeopardizes the final pact.

Initially, Opec+ said it would reduce oil production by about 10 percent of global supplies, and said it wanted other producers to cut an additional 5 percent. However, efforts to conclude the agreement were hampered when Mexico refused to agree to all terms.

Speculation argues that The Justification of The President of Mexico, Andrés Obrador, would be the possible statement of Donald Trump on the United States to be able to make cuts on behalf of Mexico. However, it has not been proven that the US president has publicly signaled that the U.S. would make cuts, instead threatening Saudi Arabia with tariffs and other measures if the kingdom does not resolve the oil market crisis.

If Mexico signs, the Opec+ pact will cause the removal of 10 million barrels per day in oil production, and another 5 million would go out of circulation if the U.S. and others sign.

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