MEXICO CITY (Reuters) - Mexico has been communicating with other oil-producing countries about stabilizing production to obtain an appropriate crude price, the government said on Thursday, even though it has given no indication of any plans to curb Mexican output.
U.S. President Donald Trump said on Thursday he expected Russia and Saudi Arabia to announce a major oil output cut by as much as 15 million barrels per day, while Saudi state media said the kingdom was calling an emergency meeting of oil producers.
Global oil prices, which in the first quarter registered their steepest fall in history, soared in reaction. Benchmark Brent crude futures jumped 19% while U.S. WTI gained 23% to $22.55 per barrel.
Writing on Twitter, in reaction to Trump’s prediction of a major output cut, Mexico’s Energy Minister Rocio Nahle said she was pleased the United States, Russia and Saudi Arabia were “on the same track.”
“Mexico’s government maintains communication with producing countries with the purpose of stabilizing the production platform and achieving a suitable oil price,” Nahle added.
Earlier on Thursday, Mexican President Andres Manuel Lopez Obrador said the country, which he said is producing nearly 1.8 million barrels per day (bpd) of oil, would increase domestic refining as opposed to planning output cuts.
He did not provide a time frame for the measure to be implemented.
Lopez Obrador has promised to increase domestic refining capacity by building a new $8-billion refinery, while also refurbishing existing facilities to produce more gasoline and diesel. The move would reduce Mexico’s crude exports as it makes more use of its oil at home.
Even though other Latin American producers such as Brazil have announced production cuts and slashed oil investment to deal with historically low oil prices, Lopez Obrador has said the new Dos Bocas refinery will not be postponed or cancelled.
Mexico’s oil revenue is protected by a $1.4-billion hedging program. State oil company Pemex also contracts an annual hedge, which this year covers about a quarter of its current export volume.
But rating agencies have said the hedging programs and Pemex’s available credit lines will not be enough for the country and its highly indebted oil company to weather the storm of low oil prices this year.
Reporting by Frank Jack Daniel and Marianna Parraga; Editing by Dave Graham, Franklin Paul and Tom Brown
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