U.S. West Texas Intermediate and international benchmark Brent crude oil futures are likely to firm next week after OPEC and its allies agreed to a historic production cut agreement on Friday. The reason we’re not too enthusiastic about a major breakout to the upside or change in trend is because dealmakers hit a snag and we continue to look for demand destruction.
According to reports, and agreement to cut production between OPEC and its major friends, including Russia, hit a snag after Mexico refused to agree to its share of the cuts after a grueling nine-hour marathon meeting between the parties.
The other major players know as OPEC+ earlier in the day agreed to cuts that would take 10 million barrels per day offline as the coronavirus pandemic saps demand for crude.
“A statement released by OPEC following the meeting outlined details of the cuts but notes the measures “agreed by all the OPEC and non-OPEC oil-producing countries participating in the Declaration of Cooperation, with the exception of Mexico, and as a result, the agreement is conditional on the consent of Mexico.”
Apparently OPEC+ wants Mexico to cut production by 400,000 barrels per day, but Mexico will only agree to a 100,000 barrel per day reduction for the next two months.
I expect the parties to reach a compromise over the weekend so I’m sticking with my forecast for a firm opening on Monday. The news may be enough to underpin prices over the…