As Saudi Arabia, Russia, and the UAE were unable to reach a compromise, OPEC and its allies abandoned their decision to increase oil production, and oil prices jumped to their highest level in three years.
OPEC+Petroleum Minister was scheduled to reconvene on Monday failure An agreement was reached last weekend because the UAE was dissatisfied with its perceived supply targets as too low and underestimated its production capacity.
However, because high-level bilateral talks were unable to break the deadlock and reach the necessary agreement before the official meeting plan began, the virtual gathering was cancelled.
The OPEC Secretary-General told the ministers that the meeting had been “cancelled.” “The date of the next meeting will be decided in due course.”
A person familiar with Saudi Arabia’s policy said that the UAE’s position has made transactions out of reach, and prices may now rise as a result.
“We missed a good opportunity to help the market alleviate a temporary shortage,” he said. “they [UAE] Now we need to bear the pressure of rising oil prices. ”
The international benchmark Brent crude oil rose to US$77.09 per barrel, an increase of 1%, reaching its highest level since 2018. The US benchmark West Texas Intermediate crude oil rose to US$76.20 per barrel.
Louise Dickson of consulting firm Rystad Energy said: “The postponement of the OPEC+ conference brings the market closer to the absence of the alliance to provide additional oil in August, which is why oil prices rose immediately.
Riyadh and Moscow promoted a proposal to increase production by 400,000 barrels per month from August to December, and extend the OPEC+ supply agreement reached last year beyond the scheduled end date of April 2022.
Although the UAE has expressed support for increasing production, it requires its own benchmark output-the basis for calculating supply reduction-to take into account its higher output capacity and be reviewed before agreeing to extend the agreement.
People familiar with the UAE’s position said that Saudi Arabia and Russia need more time to discuss Abu Dhabi’s position, which remains unchanged.
“There is no extension,” said a person familiar with Saudi and Russian positions. “The UAE blocked this decision, so the meeting was cancelled. The current production level remains the same.”
Since the beginning of this year, as demand has recovered deeply from the pandemic and vaccination programs have allowed wealthy countries to reopen, oil prices have risen by 50%.
Last year, OPEC+ slashed oil production by nearly 10 million barrels per day, which is almost 10% of pre-pandemic demand, due to declining consumption and has been slowly increasing supply to the market in recent months. The current cut is slightly less than 6 million barrels per day.
Analysts said that the solution to the UAE’s complaints about its benchmarks is complicated because it may need to review the goals of other countries, which may reduce the quotas of some of the largest producers, including Russia.
Confrontation exposed Increasing tension Saudi Arabia and the UAE are traditionally close allies in Gulf politics and within OPEC. In recent years, the UAE has invested a lot of money in improving oil production capacity.
Some analysts warned that if the basic agreement breaks, OPEC+ group pressure may eventually lead to a substantial increase in supply, thereby freeing producers from output restrictions.
Last year, after Russia initially refused to join the ranks of its supply cuts, Saudi Arabia substantially increased production at the beginning of the pandemic, and as lockdowns and travel restrictions began to curb demand, exacerbating the price collapse.
The production cut agreement in April last year was partly facilitated by the then U.S. President Donald Trump, who called for a stop to the price war against the U.S. shale oil industry.
Last week, the Biden administration stated that it is concerned about the magnitude of the increase in oil prices in recent months. Analysts believe the move is a signal to Gulf allies, including Saudi Arabia and the UAE, that they want to see higher levels. Oil production. Cool down to meet.