Saudi Arabia’s setbacks showing global oil accord is elusive

A global deal to cut oil production and save the market from a coronavirus-induced breakdown proved elusive on Friday as a diplomatic initiative led by Saudi Arabia suffered repeated setbacks.

After two days of talks, the kingdom still hadn’t resolved differences with Mexico that would allow its agreement for a record 10-million-barrel-a-day supply reduction to proceed, delegates said. Negotiations continued at a high level, with some progress, they said, asking not to be named because the talks were private.

Earlier in the day, a meeting of energy ministers from the Group of 20, including Natural Resources Minister Seamus O’Regan, ended with a statement that supported measures to stabilize the market but didn’t commit to any specific supply reductions, according to a draft of the communiqué. The cartel had been hoping G20 members including the U.S. and Canada could contribute another five million barrels a day of cuts.

These diplomatic obstacles cast doubt on efforts to revive the market from a debilitating slump in prices to the lowest in almost two decades. It was left up to Saudi Energy Minister Prince Abdulaziz bin Salman and U.S. President Donald Trump to salvage something.

The G20 call “was about finding the mechanisms to achieve price stability,” O’Regan told reporters after the meeting ended.

If the deal can be finalized, the proposed OPEC+ cuts would dwarf any previous market interventions. They would also end the destructive price war between Riyadh and Moscow that’s flooded the market with crude just as demand collapses because of the coronavirus lockdown.

“Even if poorly implemented, the agreement is substantial, and will make a difference to the market,” said Ann-Louise Hittle, vice-president of macro oils at Wood Mackenzie Ltd.

All but one nation among the Organization of Petroleum Exporting Countries and its allies endorsed the output cut equivalent to about 10 per cent of global supply. Mexico insisted that it could only cut by 100,000 barrels a day, not the 400,000 OPEC+ was asking for and blocked passage of Thursday’s deal.

On Friday morning, Mexico said the U.S. would make an additional 250,000 barrels a day of cuts on Mexico’s behalf.

Kremlin spokesman Dmitry Peskov told reporters in Moscow that Russia considers the OPEC+ deal to be fully agreed and regards it “very positively.” However, there was no indication Saudi Arabia had accepted the proposal and the U.S. couldn’t say the deal will go ahead. Bloomberg and Reuters