OPEC sees Sunday’s oil production talk as an ebb from UAE
Through Javier Blas, Salma El Wardany and Grant Smith at 7/17/2021
(Bloomberg) – OPEC and its allies plan to hold a meeting on Sunday, delegates said, after the group made significant progress towards resolving a standoff with the United Arab Emirates which had blocked a deal to increase the production.
The online ministers’ conference could take place around 12 p.m. Vienna time, although one delegate warned that there were still logistical challenges to overcome. Ministers from Saudi Arabia, Kuwait, the United Arab Emirates and Oman met online Saturday to discuss the issue, delegates said, asking not to be named as the information is not public. .
The possible meeting follows signs that tensions between Riyadh and Abu Dhabi have eased after an unusually public fight. Earlier this month, the Organization of the Petroleum Exporting Countries and its allies were forced to abandon a tentative deal to increase oil production in monthly installments of 400,000 barrels per day over last-minute objections from United Arab Emirates, who said their production limit was unfairly low.
The failed talks briefly sent crude to a six-year high in New York City, although prices have since fallen to trade just below $ 72 a barrel on Friday.
Earlier this week, the two sides reportedly approached a compromise that could give the UAE a more generous production limit next year and allow the rest of the group to ramp up production.
If there is a deal on Sunday, it is unclear how fast additional supplies can be delivered to the market. August sales volumes are largely stalled and most Gulf countries are bracing for an Islamic holiday that will shut down government offices and businesses for most or all of next week.
Without additional OPEC + production, the International Energy Agency warned on Tuesday that the oil market “would tighten considerably” and could harm economic recovery.
The dispute between the UAE and OPEC + centers on its demand for a higher production limit next year, in return for supporting an extension of the current cartel deal from April 2022 to December 2022 .
At the previous OPEC + meeting, Abu Dhabi asked to reset the benchmark for its production cuts to around 3.8 million barrels per day next year, potentially raising its production limit to over 600,000 barrels. per day.
Last week, the UAE was ready to set its new baseline at 3.65 million barrels per day, a delegate said. Another delegate said this figure was still under discussion and subject to change.
Oil analysts have warned that the UAE’s request could open a “Pandora’s box” for OPEC + as other members seek better terms to address their own grievances. Effectively, Iraq is also pursuing a higher benchmark production, according to one delegate, who did not specify the number it is requesting or when it would come into effect.
Like the United Arab Emirates, Baghdad has strengthened its production capacities since the start of the OPEC + agreement with the help of international companies.