MEXICO CITY/DUBAI (Reuters) – The biggest supply cut ever contemplated by the world’s top oil producers is hanging in the balance as a refusal by Mexico’s leftist leader to imperil his plans to rebuild state oil company Pemex has angered the Saudi prince who helped craft the deal.
FILE PHOTO: Mexico’s President Andres Manuel Lopez Obrador holds a news conference at the National Palace in Mexico City, Mexico, March 17, 2020. REUTERS/Henry Romero
For the past three days, Mexico has kept the oil industry on tenterhooks by resisting Saudi pressure to sign up to global cuts worth nearly a quarter of output for participating countries, aimed at reviving prices from their lowest level in decades.
Prices have collapsed as the new coronavirus outbreak has shuttered economies around the world and destroyed demand for fuel.
The refusal by President Andres Manuel Lopez Obrador to compromise his plan to revive Pemex by agreeing to steep cuts has shone the global spotlight on Mexico as he prioritizes his domestic agenda over the collective interests of the world’s largest oil producers.
Determined to shore up the money-losing and heavily indebted Petroleos Mexicanos, as Pemex is officially known, Lopez Obrador offered only a cut of 100,000 barrels per day (bpd), rather than the 400,000 bpd the group of global producers sought.
In a compromise hammered out with U.S. President Donald Trump, Lopez Obrador said on Friday the United States had offered to cut an additional 250,000 bpd on Mexico’s behalf, bringing them close to the target.
However, Saudi Arabia – the heavyweight of global oil diplomacy – has balked at that and dug in its heels, despite some other producers from the group of OPEC nations and their allies – known