OPEC+ meeting yet to resume amid Saudi-UAE standoff

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 2-1/2 year highs, with Brent 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. They have been gradually relaxed and 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 the 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. As negotiations continued, the meeting had yet to begin by 1450 GMT, sources said.

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 its pact.

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

Decisions in OPEC+, which groups the Organization of the Petroleum Exporting Countries with Russia and other big producers, 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, combining financial and military muscle to fight Yemenis and project power elsewhere. But the UAE has withdrawn from action in Yemen, while Saudi Arabia has sought to challenge the UAE’s dominance as the region’s business and tourism hub.

The UAE in August 2020 also agreed to normalise relations with Israel, while Saudi Arabia has no official diplomatic relations with Israel.