DUBAI: The United Arab Emirates slammed the current OPEC+ oil output accord as unjust on Sunday (July 4), deepening a row that threatens to undermine the energy market’s post-pandemic recovery. The UAE’s attempt to raise its production baseline is said to have stymied last week’s meeting of the oil-producing countries’ alliance, as well as pitting it against its friend Saudi Arabia.
In a televised interview, Energy Minister Suhail Mohamed Al-Mazrouei said, “The UAE seeks fairness in the new deal after April, and it is our sovereign right to demand reciprocity with the rest of the countries.”
“It is illogical to accept greater unfairness and sacrifice – we have been patient,” he added in an interview with Sky News Arabia, in unusually forthright remarks from an official in the UAE, which is known for its secrecy when it comes to disagreements.
While Saudi Arabia and Russia, as presidents of OPEC+, favour keeping the agreement in place through December 2022, the UAE wants to lock in a production rise before agreeing to an extension beyond April, when the existing accord ends.
Friday saw videoconference conversations between the 13 members of OPEC proper, chaired by Saudi Arabia, and the 23 members of OPEC+, followed by a technical meeting and discussions.
Russia, the world’s second-largest oil production, is included in the larger category.
According to Deutsche Bank analysts, the stumbling block in talks emerged “as a result of the UAE voicing a last-minute protest to the Russian-Saudi Arabia pact signed earlier.”
According to Saxobank’s Ole Hansen, “the UAE, which has increased its production capacity since the individual baselines were set in 2018, insisted on having its baseline raised by 0.6 million barrels per day (bpd) to 3.8 million bpd, allowing them a unilateral production increase within the current quota framework.”
“Negotiations will be challenging since OPEC+ knows that allowing the UAE to produce from a different base will enrage other members,” said Louise Dickson of Rystad.
OPEC+ is essentially forced to choose between giving in to Abu Dhabi’s demands or failing to reach an agreement, which could result in dramatically higher petroleum prices. The alliance’s unity is also under jeopardy, since a price war might ensue, wreaking havoc on the global economy. ANGER OVER EXTREMELY HIGH PRICES The OPEC meeting will resume on Monday at the cartel’s Vienna headquarters, according to OPEC. Al Mazrouei stated that the UAE was willing to appoint a committee of impartial bodies to investigate its request. According to Bloomberg, a deal has been announced that would increase output by 400,000 barrels per day (bpd) each month from August onwards, reaching a total of 2 million bpd by the end of 2021. This would be consistent with OPEC+’s overall plan, which has been in place since May: Gradually increasing output, which had been dramatically reduced in response to the demand collapse at the start of the coronavirus epidemic. The committee has met practically monthly since the start of the economic crisis to coordinate their reaction. Their plan has succeeded in reversing the downward trend in prices, which have already reached levels not seen since October 2018. The partnership must navigate a complicated market marked by a surge in demand that could prove fragile, as well as the possibility of additional Iranian shipments returning in the medium term. However, current high prices, which saw Brent crude rise beyond US$76 a barrel last week, are causing discontent among major crude consumers, such as India. Abu Dhabi’s bravado is placing it against Saudi Arabia, its long-time partner and neighbor and the world’s largest oil exporter. The UAE is rumored to have floated the notion of leaving OPEC+ in late 2020 in order to pump more oil and capitalize on its massive capacity expansion expenditure. According to Roger Diwan, an oil analyst at consultant IHS Markit Ltd, “the UAE will press hard at this juncture to use this meeting to get their excess capacity recognized and brought back online.” “Compromise occurs, but only in terms of how they bring their capacity, not if they bring it.”/n
