The biggest supply cut ever contemplated by the world's top oil producers is hanging in the balance as a refusal by Mexico's leftist leader to imperil his plans to rebuild state oil company Pemex has angered the Saudi prince who helped craft the deal.
For the past three days, Mexico has kept the oil industry on tenterhooks by resisting Saudi pressure to sign up to global cuts worth nearly a quarter of output for participating countries, aimed at reviving prices from their lowest level in decades.
Prices have collapsed as the new coronavirus outbreak has shuttered economies around the world and destroyed demand for fuel.
The refusal by President Andres Manuel Lopez Obrador to compromise his plan to revive Pemex by agreeing to steep cuts has shone the global spotlight on Mexico as he prioritizes his domestic agenda over the collective interests of the world's largest oil producers.
Determined to shore up the money-losing and heavily indebted Petroleos Mexicanos, as Pemex is officially known, Lopez Obrador offered only a cut of 100,000 barrels per day (bpd), rather than the 400,000 bpd the group of global producers sought.
In a compromise hammered out with U.S. President Donald Trump, Lopez Obrador said on Friday the United States had offered to cut an additional 250,000 bpd on Mexico's behalf, bringing them close to the target.
However, Saudi Arabia, the heavyweight of global oil diplomacy, has balked at that and dug in its heels, despite some other producers from the group of OPEC nations and their allies, known as OPEC+, calling for the cuts to go ahead regardless.
Lopez Obrador, a staunch advocate of non-intervention in other countries' affairs, defended his stance on Friday, harking back to a time Mexico was "strong" and "self-sufficient" in oil.
"There were stories in the papers trying to blame us, that there wasn't a deal because of us," the 66-year-old president told reporters, adding that Mexico could not afford the 23 percent production cut asked of it, but had offered 5.5 percent.
"Mexico is doing its bit."
Lopez Obrador's insistence on the importance of rescuing Pemex was crucial in the arguments he used to persuade Trump to help out, a senior Mexican official told Reuters.
Meanwhile, his representative at the OPEC+ talks, Energy Minister Rocio Nahle, upset some other countries, notably the host Saudi Arabia, whose negotiator Prince Abdulaziz bin Salman argued that making exceptions could encourage others to dodge output commitments, according to several delegates.
"If OPEC+ accepted this and everybody who doesn't like the numbers can just withdraw or leave, then we are in for a really bad time," said one OPEC source.
The source said Nahle, who only last month signed up to smaller planned cuts, was intransigent over the proposed reductions.
For producers, the cuts are bitter but necessary medicine for low prices. Iraq is relying on oil revenue to rebuild after years of brutal internal conflict, and yet committed to reductions of one million bpd.