Mexico will suspend oil production at 19 new fields

US, WASHINGTON (ORDO NEWS) — Mexico will suspend oil production at 19 new fields, said Mexican President Andres Manuel Lopez Obrador. “When oil costs nothing, we can close the valves,” he said.

The development of these fields began last year, over 200 wells were drilled. Now on the world market there is an excess of oil of 20-30 million barrels per day: all oil storage facilities in the world are on the verge of filling. Consumers are refusing new supplies, so Mexico is preparing to cut production.

On April 16, 2020, the international rating agency Fitch Ratings downgraded Mexico’s sovereign rating to the lowest level of investment because of concerns that the coronavirus pandemic this year will cause a “serious recession” in Latin America’s second largest economy.

The agency downgraded Mexico from BBB to BBB-, outlook stable. Fitch predicts Mexico’s economy will contract by at least 4% this year.

In the second half of the year, it is expected that economic recovery will begin. Burdened by debt, Pemex, the national oil company, “remains a key risk factor, especially given the sharp drop in oil prices,” warns Fitch. Mexico’s economy contracted 0.1% in 2019. This year, the coronavirus pandemic threatens to cause an even sharper decline.

On April 12, 2020, OPEC countries and partner countries of the alliance (OPEC +) entered into a historic agreement to reduce production by 9.7 million barrels per day, or 10% of world oil supplies. This happened after lengthy consultations in which the heads of 23 states participated. If the remaining oil producing countries join OPEC +, the reduction will reach 15-20 million.

After several days of controversy, Mexico agreed on April 12 to reduce production by only 100 thousand barrels per day, instead of the expected 400 thousand of the general terms of the deal for everyone.

The reduction in production will begin on May 1 and will last until the end of June. From July to the end of 2020, the OPEC + decline will amount to 7.7 million barrels, and from January 2021 to April 2022 – 5.8 million barrels per day, if necessary. Russia will reduce production by 2.5 million barrels per day, and previously produced 11 million. The reduction is measured from the pre-crisis level of March 6th.

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