MEXICO CITY (Reuters) - Mexico and other nations are seeking to mediate between Russia and Saudi Arabia to end a price war that has battered world markets, Mexico’s finance minister said on Tuesday, citing his country’s prior experience in calming a crude producer feud.
International crude oil prices suffered the biggest rout in nearly 30 years on Monday, after top producers Saudi Arabia and Russia began a price war that threatens to inundate global oil markets with supply.
Prices have only partially recovered on hopes of economic stimulus.
“We along with some other countries are looking to be a type of third party to build bridges,” finance minister Arturo Herrera said at a news conference.
Oil producer Mexico is part of a group of countries that together with the Organization of the Petroleum Exporting Countries (OPEC) had kept a lid on production in recent years to support prices.
In 1998, after a year of secret diplomacy and hushed-up private talks around the world, Saudi Arabia and then important producer Venezuela were persuaded to cut a deal by non-OPEC Mexico, overcoming mutual acrimony and leading to a rise in oil prices.
Herrera mentioned that negotiation as a model of what the countries were seeking to do this time.
“Mexico was a country that mediated, it requires certain diplomatic abilities,” he said, without giving details of the other nations he said were looking to help.
Herrera said Mexico has already started to look at possible channels to reach the two sides.
Twenty-two years ago, Mexico and others agreed to output cuts to end the feud. Mexico is not the player it was, however. It currently produces 1.7 millions barrels a day (bpd) of crude. Back then, it was a much larger producer, with output of more that 3 million bpd.
Last week, a three-year pact between Russia and Riyadh collapsed, leading to the scrapping of all restrictions on output in a market already awash with oil.
Mexico was present at the meeting in Vienna where the so-called OPEC+ group failed to reach an agreement.
With most OPEC countries heavily reliant on oil income, the price rout puts a huge strain on state finances. At Monday’s low of nearly $31 a barrel, OPEC members were estimated to be losing about $500 million a day in revenues.
Mexico’s budget is better protected than most thanks to a large hedge it takes out to insure oil production against price drops. State-oil company Pemex, however, already teetering on a ratings downgrade to junk, is less well insulated.
Reporting by Frank Jack Daniel, additional reporting by Abraham Gonzalez; editing by Dan Grebler and Richard Pullin