Updates with details of G20 discussions
President Donald Trump said today the US will help Mexico meet its obligation to cut production under the tentative Opec+ agreement, potentially paving the way for formalizing the accord between Opec and other major producers.
"We are trying to get Mexico, as the expression goes, over the barrel," Trump said. "The US will help Mexico along and they will reimburse us some time at a later date when they are prepared to do so."
Mexico held up the finalization of the agreement yesterday, balking at the request to cut production by 400,000 b/d — 23pc — in May-June from a baseline of 1.75mn b/d.
Mexico's president Andres Manuel Lopez Obrador said today Mexico will cut production by 100,000 b/d, adding that Trump has offered to reduce US crude output by an additional 250,000 b/d to compensate for Mexico's inability to do so.
Trump confirmed the discussion and the pledge — but not the actual form the putative US production cut will take. The US has refused to undertake any formal pledges ahead of Opec+ discussions. US energy secretary Dan Brouillette told his G20 colleagues today that US crude output could decline by as much as 3mn b/d as he encouraged Opec+ members to finalize a tentative deal to cut output by 10mn b/d for two months from 1 May.
Helping Mexico meet its obligations means some production cuts by the US, Trump said, but added that "the US production has already been cut because we are a market-driven economy and oil is very market-driven."
Pressed to explain just what the US has undertaken to do, Trump demurred. The US will cut 250,000 b/d, he said, "which is what we already have done."
The White House declined to provide details on what mechanism the US will use to implement Trump's promise to Lopez Obrador. And Trump said the offer was yet to be accepted by other Opec+ producers. Mexico will "hold firm" on its offer, energy minister Rocio Nahle said at the conclusion of the G20 meeting.
Trump has been working to broker the deal between Opec+ countries, holding telephone discussions with Russian president Vladimir Putin and Saudi King Salman bin Abdulaziz to finalize the production cuts. Putin separately held talks with Saudi crown prince Mohammad bin Salman to close the deal, the Kremlin said.
Unlike the production cuts expected of the Opec+ group, the declines touted by the US and Canada will materialize over time as a result of deep cuts to drilling budgets.
Russian energy minister Alexander Novak said today, at the conclusion of the G20 ministerial, that the Opec+ group expects the other major producers to implement 5mn b/d in production cuts by May-June.
But Canadian natural resources minister Seamus O'Regan pushed back on Novak's comments, saying that "no numbers were discussed" at the G20 meeting.
Canada is not prepared to offer any production cuts since the federal government is not legally equipped to order them, O'Regan said. But the G20 will form a task force to help Opec+ members track production declines and market-balancing moves by other countries, he said.
The US and other large consuming nations also offered to open their strategic petroleum reserves to absorb some of the excess production, even though no more than 85mn bl of crude storage is available across the OECD countries.
