OPEC consultations highlight a Saudi-Emirati dispute over oil production

  Saudi Energy Minister Abdulaziz bin Salman is "very upset" (Getty)
"Reuters" quoted sources as saying that UAE This week, it emerged from under the wing of the heavy Saudi influence in "OPEC", as it called for better commitment to cuts. Oil suppliesThis effectively caused a two-day delay in deciding on the strategy of "OPEC" and its allies. 

The unusual step highlights the growing role of the UAE within “OPEC While it seeks to increase production in the coming years to raise its market share. It also highlights Abu Dhabi’s growing political independence from Riyadh, which was demonstrated this year when the UAE became the first country in the Gulf region to normalize relations with Israel.

Markets widely expect OPEC and its allies led by Russia, within the framework of the “OPEC +” group, to extend the current production cuts of 7.7 million barrels per day to include the period from January to March in the face of weak demand amid a new increase in Covid infections. -19. Sources in “OPEC +” told “Reuters” earlier that Saudi Arabia is the first advocate for such a move.

The UAE said this week that it may support the extension, but it will find it difficult to continue with the same deep production cuts in 2021, while 3 sources told Reuters that the UAE sees the need for all countries with excess production to adhere to the reductions set for it and compensate for the previously excessive production. .

The sources said that the UAE raised the issue during informal meetings on Sunday, and again during an OPEC meeting, on Monday.

This may become a sticking point because Iraq insists that it cannot implement further cuts due to budgetary problems, while Russia has made clear that it does not see a need for compensation. “They were well aware from before it that the current level of Russian compliance is linked to the winter season and severe weather,” a Russian source said.

The cumulative excess production of Russia, which under the agreement must reduce production by 2 million barrels per day, has reached 530 thousand barrels per day since May, which means that it will need to reduce production at this level in one month to reach its target.

The cumulative excess production of Iraq is 610 thousand barrels per day. Saudi Arabia was in the “OPEC” meeting on Monday, urging other member states to officially agree to extend the supply cuts for three months before heading to the “OPEC +” meeting, on Tuesday.

The UAE and Iraq said that they would support what the organization agreed upon, but they wanted to wait until the “OPEC +” meeting, Tuesday, before making any formal decision.

Two sources said that with the increasing uncertainty, Saudi Arabia asked Algeria, which chairs OPEC this year, to formally request that the OPEC + meeting be postponed until Thursday to allow more time for consultation.

A source in the sector, who was informed of the Saudis, said that they are “really disappointed with the Emirates”. OPEC + sources said that because of this frustration, Saudi Energy Minister Abdulaziz bin Salman offered to step down from the position of deputy chairman of the OPEC + Joint Ministerial Monitoring Committee, which meets monthly and follows up major developments.

An OPEC + source said, “The Saudi minister is very dissatisfied, but said that he would not break the consensus. The position of Vice President was offered to the Emirates at that time, but she said:” No, thank you.

OPEC + must strike a delicate balance between raising prices enough to support the budgets of its members while not bringing them to very high levels so that the production of its rival, the United States, does not jump.

Saudi Energy Minister Abdulaziz bin Salman offered to step down as deputy chairman of the Joint Ministerial Monitoring Committee in “OPEC +”. The position of vice president was offered at the time to the Emirates, but she said: “No, thank you.”

And US shale oil production is heading to rise when prices exceed $ 50 a barrel. Adding to the challenges within OPEC + is that Moscow’s financial conditions allow it to coexist with lower oil prices than Riyadh needs.

(Reuters)