The historic deal had almost been derailed by a fight between Saudi Arabia and Mexico’s populist government, forcing President Donald Trump to step in and broker a face-saving solution.
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For the past month, Saudi Arabia had pumped every possible barrel for sale at rock-bottom prices, punishing Russia for refusing to support deeper OPEC+ output cuts in early March. Now, Moscow and Riyadh will both reduce daily production by millions of barrels, spearheading a global agreement between almost all the world’s major oil producers to rein in output.
The deal between the Organization of Petroleum Exporting Countries and its allies will remove nearly 10 million barrels a day from the market through deliberate cuts. In addition, the group is counting involuntary declines in the production of the U.S., Canada, Brazil and several other countries, as companies reduce drilling activity due to low prices and weak demand.
OPEC+ officials, using some creative accounting that also includes output drops in Venezuela, Iran and Libya, which are exempt from making cuts, said that as much as 20 million barrels a day will over time leave the market -- 20% of global production.
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[Trump] sealed the historic deal by offering the Saudis something that exists only on paper. When Mexico refused a big output reduction, putting the whole agreement in danger, Trump assured OPEC+ that the U.S. would cut its own production on its neighbor’s behalf.
Mexico would remove 100,000 barrels a day, and the U.S. would contribute an additional 300,000 barrels a day, Trump said at the White House. OPEC+ officials and others involved in the talks said those extra barrels simply didn’t exist. The decline in American production would be driven by prices, demand, and capacity in pipelines or tanks, not presidential press conferences.
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