Global supply talks
Oil price hopes rise after Trump cuts deal with Mexico
Global demand has fallen
A breakthrough in talks to cut oil supply and revive prices improved on reports that Mexico has accepted a proposal from the Opec+ group of producers.
An intervention from US President Donald Trump is understood to have resolved an overnight impasse, although there were still doubts over Saudi Arabia’s acceptance of Mexico’s terms.
Speaking at a press conference on Friday morning, Mexican President Andres Manuel Lopez Obrador said he and Trump reached an accord on a level of production cuts that was more acceptable than the 400,000 barrel-a-day reduction proposed by OPEC+ on Thursday.
Separately, Russian President Vladimir Putin has agreed to the OPEC+ deal.
Oil prices fell overnight because of Mexico’s reluctance to accept the initial proposal from Opec and other oil producers, known as Opec+, to cut output by a fifth or 10 million barrels per day (bpd) in May and June.
The move was expected to help prop up prices which have been battered by a price war between Saudi Arabia and Russia, and the coronavirus crisis. However, Brent dropped 4.1% to $31.48 a barrel in London.
In a statement the group said the cuts would be eased between July and December to 8 million bpd and the reductions would then be relaxed further to 6 million barrels between January 2021 to April 2022.
Global demand for oil has plummeted by about 30 million bpd, or 30% of world supplies, as lockdown measures to fight the coronavirus pandemic have curtailed car usage, grounded aircraft planes, and curbed economic activity.