OPEC+ resumes oil policy
Amid a rare public standoff between Gulf allies Saudi Arabia and United Arab Estimates, OPEC+ (Organization of the Petroleum Exporting Countries, Russia and other producers) ministers resumed talks on Monday after being unable to reach a deal on oil output policy during the two-day talk last week.
This standoff has assumed a sensitivity for the oil market, which could delay plans to extract more oil through till the end of 2021 to calm the global oil prices which have hiked to 2-½ year highs. Countries consuming oil need cruder to restrict the hike in prices posts economic recovery from the Covid-19 pandemic which ravaged the entire globe.
OPEC+ voted on Friday to lift output by about 2 million barrels per day (BPD) from August to December 2021 and to extend their remaining cuts to the end of 2022, instead of ending in April 2022.
This agreement was blocked by the UAE. The UAE said that it encouraged releasing more oil but not extending the remaining cuts beyond April 2022, without an agreement to revise its own output baseline – the level from which production cuts are calculated. The UAE also said that its baseline was set too low when OPEC+ originally forged their pact to limit supplies.
Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, called on Sunday for “compromise and rationality” to secure a deal. Saudi Arabia is also the biggest oil exporter in OPEC. OPEC+ agreed last year to cut output by almost 10 million BPD from May 2020 owing to Covid-19 demand destruction, with plans to phase out the curbs by the end of April 2022. Cuts now stand at about 5.8 million BPD.
The OPEC+ dispute has exposed a growing divide between Saudi Arabia and the UAE.
The two nations had built a regional alliance to combine their financial and military powers to fight a conflict in Yemen and project power elsewhere. However, the UAE has now withdrawn from action in Yemen, while Saudi Arabia sought to challenge the UAE’s dominance as the region’s business and tourism hub.