(Argus, 22.May.2020) — Mexico will remain within the Opec + group but has no plans for further production cuts, the energy ministry told Argus today.
“Mexico will participate in the Opec + meeting in June but we do not contemplate implementing more cuts,” the ministry said. “There are no plans to leave the group.”
Opec+, which is comprised of Opec members and allied oil producers led by Russia, will meet by videoconference on 10 June to consider further action to rebalance the global oil market following three months of turmoil caused by the Covid-19 pandemic and a price war between Riyadh and Moscow.
Despite its modest market share and limited potential for substantial production growth, Mexico took center stage at Opec+ talks in early April when it resisted calls to reduce its output by up to 400,000 b/d. In the end, Mexico agreed to cut 100,000 b/d in May and June – with the US government vaguely agreeing to reduce output by an additional 250,000 b/d during that period to compensate. Until now Mexico had not commented on its position heading into the June meeting.
Mexico’s April commitment took state-owned Pemex’s 1.75mn b/d October 2018 output as a baseline to 1.65mn b/d for May and June. March production was 1.73mn b/d.
Following four days of intense negotiations last month, Opec+ overall agreed to cut output by 9.7mn b/d between May and June with reductions gradually scaling down to 5.8mn b/d until conclusion of the deal in April 2022.
Pemex said last month that it would reduce its 2020 production target from an original 1.85mn b/d but it has yet to publish a new target.
Mexico’s crude basket price that reflects a mix of its export grades dropped to minus $2.37/bl on 20 April, its first negative price in history. While the price has crept up to $28.03/bl, it is only lightly above its $14.33/bl average breakeven.
President Andres Manuel Lopez Obrador has made rescuing Pemex and increasing crude production a cornerstone of his administration, a position that led Mexico to resist more sweeping output targets proposed in the April meeting. The friction had sparked speculation that Mexico would withdraw from the group.
— By Rebecca Conan