OPEC+ resumes oil policy talks amid Saudi-UAE standoff

OPEC+ resumes oil policy talks after 'no progress' on Saudi-UAE standoff
3 min read
The OPEC+ talks resume after the UAE would not agree with Saudi Arabia on extending remaining oil production cuts to the end of 2022, according to sources.
The UAE wants its baseline, from which production cuts are made, raised [Alex Smailes/Sygma/Getty]

OPEC+ ministers will look to salvage their oil output talks on Monday after clashing last week when the United Arab Emirates balked at a proposed eight-month extension to output curbs.

Saudi energy minister Prince Abdulaziz bin Salman on Sunday called for "compromise and rationality" to secure a deal after two days of failed discussions last week.

They centre on raising output from August, partly to help cool oil prices trading at two-and-a-half year highs, with Brent (a crude oil benchmark) at around $76 on Monday.

Those prices are prompting concerns about inflation derailing a global recovery from the pandemic.

OPEC+ agreed record output cuts of almost 10 million barrels per day (bpd) last year as the pandemic hit which have been gradually relaxed and currently stand at about 5.8 million bpd.

The UAE, according to sources, on Friday went along with Saudi Arabia and other OPEC+ members on a proposal to raise output in stages by about 2 million bpd from August to December but rejected extending remaining cuts to the end of 2022 from a current end date of April.

On Monday two OPEC+ sources said there had been no progress in resolving the matter ahead of a meeting scheduled to begin at 1300 GMT.

The UAE is upset about the baseline from which its production cuts are being calculated and wants it raised. Abu Dhabi has invested billions of dollars to increase its production capacity and says its baseline was set too low when OPEC+ originally forged their pact.

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It has also argued that it was not alone in requesting a higher baseline as others such as Azerbaijan, Kuwait, Kazakhstan and Nigeria had requested and received new ones since the deal was first agreed last year.

Decisions in OPEC+, which groups from the Organization of the Petroleum Exporting Countries with Russia and others, must be unanimous.

Potential outcomes, OPEC+ sources said, include raising output from August, or raising output from August and extending the remaining cuts with a new higher baseline figure for the UAE.

OPEC+ could also go ahead with the deal as is until April 2022 and discuss a new UAE baseline as part of a new deal, the sources said.

The dispute reflects a growing divergence between Saudi Arabia and the UAE.

The two nations had built a regional alliance, for instance, combining financial and military muscle in their strongly criticised intervention in Yemen, a nation whose situation has been described as "the world's worst humanitarian crisis".

But the UAE has withdrawn from action in Yemen, while Saudi Arabia has sought to challenge the UAE's dominance as the region's business and tourism hub.

In other regional developments, the UAE in August 2020 agreed to normalise relations with Israel. Saudi Arabia as of yet has no official diplomatic relations with Tel Aviv, though this has long been speculated about, despite indications such a move is a way off yet.

(Reuters)