G20 meeting .. US oil industry in danger, Mexico paves the way for a global agreement to end the price war

The US Energy Secretary Dan Browell confirmed on Friday that his country's oil industry is facing a dangerous situation, calling on everyone to help reduce the oversupply of crude, at a time when Mexico agreed to cut production to join the efforts led by OPEC Plus alongside the United States.

In a predetermined speech to the G20 energy ministers' meeting that concluded on Friday, Bruelet said that his country's oil industry was "seriously affected" by "incredibly damaging declines in oil markets."

Reuters quoted a source as saying that the remote G20 energy ministers' conference concluded today.

The US minister pointed out that the United States expects a reduction in production of close to two million barrels per day by the end of the year, adding that some scenarios go as low as three million barrels per day.

The Energy Information Administration in the United States said - Thursday - that US crude production is expected to decline 470 thousand barrels per day, and that demand is heading to go down about 1.3 million barrels per day in 2020, in light of the markets affected by the global pandemic of the Corona virus.

The US Secretary of Energy spoke of a harsh situation in global energy markets, saying that the Corona virus pandemic and the huge surplus of oil supplies have created a fatal mix.

"It is time for all countries to search diligently for everything that each can do to remedy the imbalance of supply and demand ... We call on all countries to use the various tools at their disposal to help reduce the surplus," he said.

President Donald Trump and other administration officials are in talks with other countries to help reduce the surplus, while the United States is storing as much oil as possible in its strategic oil reserves, to address the oversupply situation.

"We will look for more opportunities to mitigate the damage to our products ... but it is in all of our interests for the sector to return to a position of strength in order to ensure that energy will lead economic growth again and enhance our national security," said Bruelet.

Saudi request
For his part, Saudi Energy Minister Prince Abdulaziz bin Salman - Friday - asked all oil producers to make every effort to restore stability to the oil market.

The minister said during the opening speech of the meeting of energy ministers of the Group of Twenty, which was held via closed-circuit television, "The restoration of stability to oil markets is necessary to achieve a rapid economic recovery", at a time when the markets register a supply glut.

"We urge the members of the Group of Twenty - including Mexico - to adopt appropriate measures to stabilize the state of the oil market, based on the principles of justice, fairness, transparency, and inclusiveness," the Saudi minister added.

Saudi Arabia, which arranged for the energy ministers ’meeting Friday, will chair the current session of the G20, and will continue until November.

And at dawn on Friday, OPEC said in a statement that Thursday's agreement provides for the implementation of the "OPEC Plus" coalition, to reduce crude production by ten million barrels per day, from May to the end of June 2020.

According to the agreement, production cuts will decline to eight million barrels per day, from July until the end of 2020, followed by six million barrels per day early 2021 until the end of April 2022.

"The above was agreed upon by all OPEC member countries and non-oil producing countries participating in the declaration of cooperation, with the exception of Mexico, and as a result, the agreement is conditional on Mexico's approval," OPEC said.

Mexican move
While the markets feared differences between Saudi Arabia (the largest OPEC country) and Russia, Mexico blocked the agreement to reduce production, considering that the effort required of them - that is, to reduce production by 400 thousand barrels per day - is exaggerated compared to other countries, and proposed a reduction of 100,000 barrels.

And later on Friday, Mexico's President Andres Manuel Lopez Obrador announced that he had reached an agreement with his US counterpart Donald Trump, indicating that his country would cut production by 100,000 barrels per day.

Lopez Obrador said that Trump agreed to cut US production by 250,000 barrels per day as compensation in Mexico, adding that Trump was the one who communicated with him.

In the aftermath, Trump confirmed on Friday that the United States agreed to help Mexico reach a global agreement between producing countries and curb price collapse.

"We accepted cuts. They accepted to do something to compensate us in the future," Trump said.

Thus, Trump confirmed his acceptance of reducing US production by 250,000 barrels per day, according to what his former Mexican counterpart said.

The proposed agreement marks a possible end to the price war between Russia and Saudi Arabia, which have borne the largest share of production cuts, as they agreed to reduce their production by about 8.5 million barrels per day.

The United States - which has been invited to the meeting - cannot participate directly in the talks, because of its antitrust laws that prohibit this type of understanding.

Russian position
On Friday, Trump spoke with his Russian counterpart, Vladimir Putin, to discuss fighting the emerging corona virus and global oil prices.

The Kremlin, for its part, said that the Russian President and his American counterpart discussed in a phone call on Friday a possible global agreement on oil production cuts for the OPEC Plus group, and he said that Putin and Saudi Crown Prince Mohammed bin Salman discussed the phone.

For his part, Russian Energy Minister Alexander Novak urged G20 ministers to work in a spirit of "partnership and solidarity," according to a local TV station.

The Russian "Interfax" news agency reported earlier Friday that Russia will reduce its oil production by 1.8 million barrels, if the OPEC Plus alliance agreement is approved.

Question
Even if this agreement is concluded, observers question the ability of producers to support prices. Analysts at Raistad Energy Group said, "A reduction of ten million barrels per day in May and June will prevent reaching maximum storage limits, and will prevent prices from collapsing, but it will not allow to achieve the desired balance in the market."

Oil prices fell on Thursday despite the fact that OPEC is close to an agreement, as orders to impose general isolation measures around the world have taken their lives from the global economy.

Markets are closed on Friday for the "Good Friday" holiday in the major centers, but Thursday, Brent crude was traded at about $ 32 a barrel, which is half of the level recorded at the end of 2019.