The G20 energy talks, which lasted more than five hours in a webinar format, have ended. Contrary to expectations, the issue of voluntary production cuts by analogy with OPEC + was not even discussed. On the contrary, some countries asked not to dramatize the situation with the crisis in the oil market.
The G20 virtual energy conference took place immediately after an extraordinary meeting of OPEC + countries, which on the eve agreed to jointly reduce production for a period of 2 years. Starting May 1, the countries of the Vienna Agreement will be obliged to reduce production by 10 million bpd, after July the quota will decrease.
Even before the OPEC + negotiations, Russia and Saudi Arabia, the latter chairing the G20 this year, called on other major producers such as the United States, Canada, Brazil and Norway to contribute to stabilizing the oil market.
Not only OPEC should reduce oil production in a crowded market, the Saudi Minister of Energy, Prince Abdel Aziz bin Salman, also announced at the opening of the G20 meeting. “The G20 today has a unique opportunity to help address instability in the energy market. We urge all G20 members, including Mexico, to take urgent steps to stabilize the oil market,” he said.
Ben Salman’s appeals were not baseless. An unprecedented drop in oil demand as a result of a pandemic in April can reach 20 million bps, and an average of 7 million bps a year, OPEC estimates. Thus, OPEC expected large oil exporters from the Big Twenty to reduce production by at least 5 million bps with the efforts of the United States, Canada, Brazil and Norway (the latter is not included in the G20).
However, the communiqué prepared following the meeting did not contain specific quotas for reducing production. But this issue was not even raised for discussion. However, the ministers agreed to create a coordination group that will monitor the oil market. In addition, the final statement states the need to “take immediate action to stabilize the oil market.”
Another hope associated with the negotiations concerned the position of Mexico, which is a member of both the G20 and the OPEC + alliance. On the eve of Mexico was the only country that did not begin to sign an agreement to reduce production under OPEC + by 10 million bpd. Because of this, the finalization of the transaction was postponed until Friday – OPEC hoped that it would be possible to convince the intractable Rocio Nale, the head of the Mexican energy department, during the G20 session.
However this was not possible. After hearing all the coalition colleagues, Ms Nale said that the position has not changed: Mexico will not reduce production by the proposed 400 thousand bpd.
However, Nale had strong support in the person of US President Donald Trump, who said on Friday that the United States would help Mexico reduce oil production. Having taken over most of the neighboring country’s quota, the States hope to receive some compensation from Mexico in the future, Trump explained. Whether such a scheme will settle Saudi Arabia and OPEC + as a whole is still unknown. Another obstacle in the negotiations was the divergence in assessments of how the pandemic affected the oil market. The figures voiced by OPEC did not convince everyone at the G20 conference. Somme European countries have advocated softening the rhetoric in the final text of the communique so as not to dramatize the situation.