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On September 12, 2019, OPEC Secretary General Mohammed Sanusi Barkindo (L), Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman (C), and Russian Energy Minister Alexander Novak (R) meet in Abu Dhabi, UAE. KARIM SAHIB | Getty Images via AFP LONDON, United Kingdom — OPEC has been thrown into disarray, with intense infighting between Saudi Arabia and the United Arab Emirates raising doubts about the oil alliance’s future. After last week’s meetings unexpectedly failed to reach an agreement on oil production strategy, OPEC and non-OPEC partners, a group of some of the world’s most prominent oil producers, abruptly canceled plans to reassemble on Monday. The group has not scheduled a new date for negotiations to restart. It implies that no agreement on a prospective rise in crude production beyond the end of July has been achieved, keeping oil markets in limbo as global fuel consumption recovers from the current coronavirus outbreak. In a research note, Helima Croft, head of global commodity strategy at RBC Capital Markets, stated, “OPEC+ has been thrown its most significant crisis since last year’s ill-fated price war between Saudi Arabia and Russia.” “Back-channel conversations are said to be ongoing, but doubts about the UAE’s willingness to remain in OPEC are expected to intensify in the coming days.” According to Croft, the rivalry between the UAE and Saudi Arabia looked to be about more than energy policy, with Abu Dhabi “apparently bent on slipping beyond Saudi Arabia’s shadow and charting its own route in global affairs.” They were held together by the pandemic, but now the post-pandemic is tearing them apart. Kilduff, John Again Capital’s founding partner When the coronavirus pandemic coincided with a historic fuel demand shock, OPEC+, which is controlled by Middle Eastern crude producers, agreed to execute major crude production cuts in 2020 in an effort to stabilize oil prices. OPEC+ has convened regularly to decide on production policy, led by Saudi Arabia, a strong ally of the UAE. OPEC cohesion has ‘disappeared.’ The chaos comes after OPEC+ voted on Friday to increase oil output by around 2 million barrels per day in 400,000 barrels per day monthly installments between August and the end of the year. It was also proposed that the remaining output cuts be extended until the end of 2022. The UAE, on the other hand, has rejected the plans, claiming that it needs a greater baseline for its quota to allow for increased local production. “No agreement was reached,” Tamas Varga, an oil analyst at PVM Oil Associates, wrote in a research note. “As it stands now, the OPEC+ alliance, if that is still the proper word to characterize the group, will output at the July level for the rest of the year.” “The meeting’s [non-] result rewrites the supply-demand landscape for the immediate and potentially far future,” he continued. Energy ministers from both nations went on a media blitz over the weekend to establish their separate stances in the unusual public standoff between the UAE and Saudi Arabia. On Sunday, UAE Minister of Energy and Infrastructure Suhail Al Mazrouei told CNBC’s Hadley Gamble, “It wasn’t a good deal for us.” He went on to say that while the country was willing to accept an increase in oil supplies in the medium term, it wanted better terms beyond 2022. Saudi Arabia’s Energy Minister Abdulaziz bin Salman, speaking to the Saudi-owned Al Arabiya television channel on Sunday, urged for “compromise and rationality” in order to achieve a settlement on Monday, according to Reuters. Separately, President Joe Biden’s administration is apparently seeking for a “compromise solution,” according to a White House official. Although the United States is not a member of OPEC (the Organization of Petroleum Exporting Countries), it has been keeping a close eye on the new round of discussions because of the potential influence on petroleum markets in the next year. “The Opec solidarity dissolved today,” John Kilduff, a founding partner at Again Capital, stated in response to the news that the OPEC+ conference had been adjourned without a deal on Monday. “They were held together by the pandemic, but now the post-pandemic is tearing them apart. The UAE is standing firm in their demand for a higher baseline. They want to be able to generate more, therefore they’re looking for ways to do so “‘I told CNBC by email,’ he said. “Now the fun begins to see who breaks away,” Kilduff said, adding that the United Arab Emirates could be the “first domino” to fall. When contacted by CNBC on Tuesday, OPEC did not immediately respond to a request for comment. Oil prices have reached multi-year highs. Oil prices rose much more as a result of the news. On Tuesday morning, international benchmark Brent crude futures were trading at $77.34 a barrel, up 0.2 percent for the session, while U.S. West Texas Intermediate futures were trading at $76.36, up 1.6 percent. WTI crude hit a high of $76.98 at one point, the highest price since November 2014. The deployment of Covid-19 vaccinations, a gradual relaxing of lockdown measures, and major production cuts from OPEC+ boosted oil prices by more than 45 percent in the first half of the year. OPEC producers are likely to expand oil output over quota next month, according to Samuel Burman, an assistant commodities economist at Capital Economics, as member states “want to take advantage” of rising oil prices. He added that, in addition to the divide between the UAE and Saudi Arabia, Abu Dhabi was “slightly upset” that Russia was not adhering to OPEC’s production restrictions. Non-OPEC leader Russia, according to Burman, has made no commensurate reduction and is currently overproducing by 100,000 barrels per day. “We believe that this quarrel including the UAE raises the danger of the entire accord collapsing, which would certainly put our near-term pricing projections at jeopardy.” Patti Domm of CNBC contributed to this article./nRead More

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