The Organisation of Petroleum Exporting Countries (OPEC) and its non-OPEC allies, led by Russia, on Sunday finally agreed to cut members’ crude oil production by 9.7 million barrels per day.
The final decision is about 300,000 barrels per day lower than the previous 10 million barrels per day adjustment announced at the end of an emergency meeting held online on Thursday.
Last week’s meeting was convened by Saudi Arabia, the group’s largest producer, to mobilise a consensus to cut global oil supply to stabilise the market and halt declining prices.
The meeting became necessary following weeks of oil supply wars between Saudi Arabia and Russia over a proposal to cut oil supply to strengthen the oil market and halt further decline in oil prices amid the worsening impact of the coronavirus pandemic on the global economy.
But, the implementation of the resolution from the meeting was jeopardized following the refusal of Mexico, a non-OPEC oil producer, to give its full commitment.
As part of the initial proposal, Mexico was to cut output by about 400,000 barrels per day between May and June.
However, President Andrés Obrador announced later that the country’s national oil company, Pemex, would not be committed to that share of cuts agreed by OPEC+.
Mr Obrador said Mexico would cut just 100,000 barrels of oil per day.
Consequently, another emergency online meeting, the second in 72 hours, was convened on Sunday to attempt to convince Mexico to change its position and align with other members.
At the end of the meeting, also attended by the representatives of Mexico, Canada, and the United States, members resolved to cut a combined volume of 9.7 million barrels per day.
Nigeria and other OPEC+ counterparts, including Mexico, affirmed their commitment to the deal.
A statement on Sunday said the intervention of the United States persuaded Mexico to agree to the deal.
In addition to the initial 100,000 barrels Mexico agreed to cut from its production, U.S. oil producers would complement it with another cut of about 300,000 barrels per day.
The additional volume would make up the original volume of 400,000 barrels per day agreed before Friday’s meeting.
“This will enable the rebalancing of the oil markets and the expected rebound of prices by $15 per barrel in the short term,” the communique signed by the Secretary-General of OPEC, Mohammed Barkindo, said.
Nigeria’s Minister of State for Petroleum Resources, Timipreye Sylva, said the latest adjustment would also help Nigeria to appropriately balance her 2020 budget estimates, which has since been rebased to $30 per barrel oil price benchmark.
In line with the agreement on Sunday, Mr Sylva said Nigeria joined OPEC+ to cut supply by 9.7million barrels per day between May and June 2020.
About eight million barrels per day would be cut from member’s production between July and December 2020 and six million barrels per day from January 2021 to April 2022.
Based on Nigeria’s reference production volume of 1.829 million barrels per day of dry crude oil in October 2018, Mr Sylva said, the country’s oil production would now be adjusted to about 1.412 million barrels per day between May and June 2020.