Until the last minute. The European summits have the habit of rushing to the maximum, often well into the early hours of the morning, to close the fringes of the negotiation. Those of the G7, three quarters of the same: although the Sherpashave already traveled almost all the way, the presidents take to the limit of the hour the agreement of a text of conclusions. The conclave of the oil powers has followed in the same wake in the last four days: taking advantage of the truce of the markets for Easter – there was no session on Friday -, the ministers of the expanded OPEC and the rest of the producers have had to wait until Last hour on Sunday to overcome the resistance of Mexico – which gets away with it and minimizes its share of cuts – and thus ends the biggest snip on the offer of all time. 9.7 million barrels will be released from the market from May, one tenth of what is extracted today every day around the world, with a single objective:
“We have shown that OPEC + [as OPEC + is known in the jargon of the sector, which includes Russia and other Eurasian countries] is awake and alive,” said Saudi Energy Minister Abdulaziz bin Salmán in statements to Bloomberg TV minutes after the deal was publicized. The cut of almost 10 million barrels per day will be applied from May – together with April, the month in which demand is expected to suffer the most from the rigors of the Covid-19 – and the figure will gradually decline until April 2022, when the oil powers will have to sit down at the table again. Still, investor response is uncertain. The tap is closed more than ever before, yes, but preliminary calculations – everything around the pandemic is provisional – point to a much larger drop in demand, between the third and the fifth part of what was consumed before the virus stopped the economy and monopolized everything: with the economy stopped, the appetite for crude oil is literally below minimums. Low crude oil prices are good news for importing countries, such as Spain, but bad for the definitive emergence of renewable energies – whose development is vital in the fight against climate change and which are comparatively less attractive in terms of economic if oil is so cheap – as for the very stability of financial markets.
And, in addition, the concrete number of cuts to which countries such as the United States, Canada, Brazil or Norway, among others, that are not part of OPEC (the historic oil cartel, led de facto by Arabia) will be committed to the air. Saudi) or expanded OPEC. They have given their word that they will apply themselves to the task of reducing supply, but it remains unclear to what extent. The US, Canada and Brazil will finally contribute a joint cut of about 3.7 million barrels per day, according to Bloomberg. That figure, however, was still in the air late Sunday. If the rest of the countries are added, that figure would be close to the five million barrels that were calculated at the beginning of the talks. According to three sources consulted by Reuters, together with the OPEC + cuts, those of the rest of external products and even some strategic purchases of crude oil by some countries, the final number of barrels that would be withdrawn from the market would be around 20 million barrels, around a fifth of the world total. In that case — the figure seems overly optimistic — it would match the low range of falling demand.
The Kremlin has insisted that Washington is part of the solution and that, despite the lack of concreteness, it is in the boat of cuts. “The USA actively supports the [OPEC +] agreement and they affirm that they are willing to contribute something to the reduction of production, a figure of between two and three million barrels per day,” stressed the Russian head of Energy and key actor. in the negotiations, Alexander Novak, in an interview on the Rossiya-1 channel. “I hope that the current situation, in the framework of the discussion on the ways out of the crisis, will become a bridge to restore confidence and continue energy cooperation [with the United States].” His words are a clear attempt to calm the markets in a moment of maximum volatility. The most recent precedent does not invite optimism: Thursday,brent closed the day with a 4% drop. Texas’ crash was even higher, above 9%.
The deal, has been boasted in a row, Trump “will save hundreds of thousands” of jobs in the US energy sector. “I would like to congratulate President [Vladimir] Putin of Russia and King [Mohamed bin] Salman of Saudi Arabia. I just talked to them. A great deal for everyone! ”He tweeted. On the back of the fracking technology revolution , in less than a decade the American giant has gone from being a crude importer to being practically self-sufficient, to the point of having lifted the historic export ban.. In this time it has displaced Riyadh from the top of the world producers’ podium and has become a tough competitor to Saudis and Russians. In parallel, the Texas oil industry has continued to grow, both in volume of extraction and in jobs dependent on it. And no one escapes that, six months after the presidential elections and with a recession in sight, Trump cannot afford to stumble in the form of bleeding jobs in a state through which he spends much of his options to remain at the White House.
The final stamp to the OPEC + pact has been put this Sunday, but it has been an agreement by fascicles. On Thursday, Saudi Arabia and Russia, the world’s top and second largest exporters respectively, parked the differences that derailed everything a month ago and reached an agreement to end their particular price war, which had added one more point of tension on prices. . The rest of countries seemed by the work. On Friday night the G20 energy ministers picked up the gauntlet and applauded the cuts outlined, but failed to ratify the agreement principle and were unable to put numbers to the snip: Mexico, a country that has continued to lose market share —And, therefore, importance— on the international oil scene, he resisted.
This Sunday, on the brink of the reopening of the markets and through a videoconference, Riyadh, Moscow and the rest of the expanded cartel have managed to overcome the Mexican resistance by accepting what the Government of Andrés Manuel López Obrador was seeking: to reduce to a minimum its share of cuts at a critical time for its economy and, especially, for its state oil company (Pemex) , the most indebted in the world. They will finally be 100,000 barrels, far from the 400,000 that were initially requested. The United States, a country that already has a good part of its production below the profitability threshold and that, therefore, each month sees how part of its offer naturally leaves the market because it is below cost, has promised to assume the difference.