How Mexico nearly foiled a new OPEC+ deal

US, WASHINGTON (ORDO NEWS) — Due to the very unstable situation in the oil market, on Thursday, April 9, the Organization of Petroleum Exporting Countries and invited participants (OPEC +) held talks with a view to concluding an agreement on reducing production and putting an end to the price war between Russia and Saudi Arabia, or at least suspend her.

These were unprecedented negotiations. Not only because they were in the midst of an economic crisis and a desperate situation in the field of health due to the Kovid-19 epidemic. But also because Mexico refused to make concessions and left the negotiations, which took place in a video conference format. In addition, during the conference, the Minister of Energy consulted with President Andrés Manuel López Obrador several times regarding some decisions.

Energy Minister Rocío Nahle left the talks, not accepting the conditions proposed by OPEC members, according to which Mexico had to reduce production by 400 thousand barrels per day, so that in May – June production around the world was reduced by 10 million barrels per day.

Although Mexico is not officially a member of OPEC +, like Saudi Arabia, the reaction of the Minister of Energy of Mexico has put negotiations in jeopardy. Along with the negotiations, the prestige of the country, which, instead of supporting the agreements, impedes their conclusion, could suffer.

While the news that Nale’s actions caused tension in the OPEC + negotiations was spreading across all social networks and international media, the Ministry of Energy refused to announce any proposals on its part.

Only at 19:55, Rocio Nale published a message in her account that Mexico proposed to reduce production by 100 thousand barrels per day for the next two months. As a result, Mexico will begin to produce not 1.781 million barrels, but 1.681 million barrels per day.

According to representatives of specialized information organizations, Nale put forward such a proposal, based on the level of production that Mexico wants to achieve by the end of 2020 (almost 1.9 million barrels). Mexico did not proceed from the current level, like all other countries. “Given the desire to reach production levels of 1.9 million barrels in 2020, Mexico could reduce production to 1.68 million barrels per day,” the minister said, provoking the indignation of many ministers and heads of state attending the talks.

Gonzalo Monroy, an energy expert, said in response to the minister that Mexico’s proposal at a high-level meeting primarily puts private companies, and not the state-owned oil and gas company Pemex, at risk. In February, it produced 1.721 million barrels per day.

The contradictory situation is that a few days ago, Mexican President Andres Manuel Lopez Obrador complained that because of the oil war between Saudi Arabia and Russia, oil prices fell sharply. This is especially true for Mexican oil, whose prices have fallen by almost 80% and are now much lower than the government expected. On Thursday, April 9, a barrel of Mexican oil was worth $ 16.54. Initially, the price was $ 49, and according to April 1, the Ministry of Finance expected the price to be $ 24.

About a week ago, speaking in a video conference format with BlackRock chief executive officer Laurence Fink, President Lopez Obrador called for acting responsibly. “We discussed the differences between Russia and Saudi Arabia. Why, at a time when the virus epidemic is having an increasing impact on the economy, the two countries cannot resolve the differences?” The president asked.

Therefore, Mexico’s unprecedented reaction to the OPEC negotiations will not only negatively affect its relations with other countries, but will also pose a greater risk to the finances of PEMEX and the government. Indeed, if the price per barrel does not increase, it will harm both the company and the government, and they will again be at the lowest levels of the rating, according to various rating agencies.

On Friday, April 10, G20 energy ministers will continue negotiations and try to come to a new agreement. Everyone except Minister Rocio Nale will be ready to conclude an agreement. She will have to explain her refusal to participate in the negotiations. April 15 will be the turn of the Minister of Finance Arturo Herrera (Arturo Herrera), who will take part in the meeting of G20 finance ministers. He will have to come to terms with the situation, because he knows that the Minister of Energy did not act alone. The decision to refuse negotiations with OPEC was made by the country’s head leader Andres Manuel Lopez Obrador.


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