Mexico to Trim Oil Output by 100,000 Barrels a Day

Applauding the decision by OPEC to cut oil output, Mexico on Tuesday reaffirmed it would join the effort to bolster lackluster world prices by reducing its own exports by 100,000 barrels a day in the first half of 2002.

The oil-rich nation, which is not a member of OPEC but a key player because it ranks among the top three oil suppliers to the United States, said its cut would take effect immediately in concert with OPEC’s tightening of supplies by 1.5 million barrels daily.

Mexico agreed in November to rein in its exports if other non-OPEC powerhouses joined the effort to reverse sinking oil prices, which slid 30% after the Sept. 11 terrorist attacks further weakened a stagnant world economy.

Mexico’s energy ministry said in a statement it was confident the OPEC and non-OPEC supply cuts “will achieve a healthy balance between supply and demand, which will allow a halt in the fall of prices and assure the necessary investments to maintain a sure and reliable supply of oil.” It had not been clear, however, where the cut would put Mexico’s export levels.

The energy ministry said the new export cap would be 1.66 million barrels daily--a cut from what Mexico had forecast in its 2002 budget but roughly in line with November’s average exports.

Mexico’s cut and pledges from Norway, Russia, Oman and Angola tallied the independent producers’ contribution to 462,500 barrels daily.

The Organization of the Petroleum Exporting Countries had pressured the non-OPEC producers to chip in with 500,000 barrels in reductions in order for the cartel to go ahead with its own 1.5 million barrels a day cut.

The oil price plunge has forced Mexico into a tough fiscal spot. Because the government relies on oil for more than a third of its income, lower oil prices can force painful budget cuts--a chief reason why Mexico joined in the OPEC effort to raise rock-bottom prices in the late 1990s.

At the same time, Mexico’s economy is closely tied to the economy of the United States, where higher energy costs could frustrate an economic recovery expected to take root in mid-2002.

The U.S. recession already has sapped Mexico’s economy, which sends 85% of its exports to the United States. Mexico’s gross domestic product is forecast to contract 0.26% in 2001, a sharp reverse from 2000’s red-hot growth of 6.9%.

Yet even as Mexico reins in its exports, the state-run oil industry probably will see more investment cash in 2002, thanks to a tax package designed to reduce the nation’s reliance on oil revenue.

After months of deadlock over tax reform, Mexico’s Congress early Tuesday passed a package of new levies that will lift government income by about $7.6 billion, or 1% of gross domestic product.