OPEC, Russia and other allies outlined plans on Thursday to cut their oil output by more than a fifth and said they expected the United States and other producers to join in their effort to prop up prices hammered by the coronavirus crisis.
But the group, known as OPEC+, said a final agreement was dependent on Mexico signing up to the pact after it balked at the production cuts it was asked to make. Discussions among top global energy ministers will resume on Friday.
The planned output curbs by OPEC+ amount to 10 million barrels per day (bpd) or 10% of global supplies, with another 5 million bpd expected to come from other nations to help deal with the deepest oil crisis in decades.
Global fuel demand has plunged by around 30 million bpd, or 30% of global supplies, as steps to fight the virus have grounded planes, cut vehicle usage and curbed economic activity.
An unprecedented 15 million bpd cut still won’t remove enough crude to stop the world’s storage facilities quickly filling up. And far from signalling any readiness to offer support, U.S. President Donald Trump has threatened Saudi Arabia if it did not fix the oil market’s problem of oversupply.
Trump, who has said U.S. output was already falling due to low prices, warned Riyadh it could face sanctions and tariffs on its oil if it did not cut enough to help the U.S. oil industry, whose higher costs have left it struggling with low prices.
A White House aide said Trump held a call with Russian President Vladimir Putin and King Salman of Saudi Arabia about the talks, after a U.S. official said the OPEC+ move towards cuts sent an “important signal” to the market.
Officials from the Organization of the Petroleum Exporting Countries and Russia have said the scale of the crisis required involvement of all producers.
“We are expecting other producers outside the OPEC+ club to join the measures, which might happen tomorrow during G20,” the head of Russia’s wealth fund and one of Moscow’s top oil negotiators, Kirill Dmitriev, told Reuters.
Thursday’s OPEC+ talks will be followed by a call on Friday between energy ministers from the Group of 20 (G20) major economies, hosted by Saudi Arabia.
OPEC and Russian sources said they expected other producers to add 5 million bpd to cuts, although an OPEC+ statement on Thursday made no mention of any such condition.
Brent oil prices, which hit an 18-year low last month, were trading around $32 a barrel on Thursday, half their level at the end of 2019.