With the recovery of the global pandemic, close allies in the Gulf have openly debated how to rapidly increase production.
The Minister of Energy of the United Arab Emirates stated that the world’s major oil producing countries have reached a “comprehensive agreement” to increase production moderately from August, ending an exposed deadlock. Increasing economic competition Between the oil-rich country and its wealthy neighbor Saudi Arabia.
Sunday’s announcement marks the stalemate about how the Organization of Petroleum Exporting Countries (OPEC+), a 23-member organization of the world’s major oil producers and allies, will continue its stalemate after restricting production due to the collapse of oil prices due to the coronavirus pandemic last year. Make a breakthrough.
As the pandemic has hit global consumption, transportation and supply chains, OPEC+ decided to withdraw 9.7 million barrels per day (bpd) from the market last year and gradually resume supply by the end of April 2022.
The Vienna-based group said in a press statement that on Sunday, members agreed to increase production by 400,000 barrels per month from August to help stimulate the global economy to recover as the pandemic eases.
It stated that the group will “assess market development” in December.
The agreement will also extend the deadline for limiting production from April 2022 to the end of 2022, a clause that Saudi Arabia seeks.
Saudi Arabia and UAE economic dispute
Although OPEC+ has gradually increased production since May, Abu Dhabi expressed dissatisfaction with Saudi Arabia’s proposal to extend production cuts to the end of 2022.
In a rare challenge to Riyadh, the UAE earlier this month criticized the proposed transaction for being “unfair”, causing the oil market to stall.
The unusual public quarrel seems to highlight the emerging rivalry between the two countries. Long-term Gulf ally Because both countries are seeking to achieve economic diversification in the long-term process of getting rid of the oil industry. Both countries expressed their desire to become the de facto commercial center of the region.
The UAE had hoped that by increasing production in the short term — as the global economy recovers from the coronavirus pandemic — it could increase the income needed to support its economic diversification plan.
Saudi Arabia warned that excessive increases could put downward pressure on prices, inhibit investment and lead to subsequent supply problems.
In order to overcome the differences, OPEC+ agreed to new production quotas for several member states from May 2022, including the UAE, Saudi Arabia, Russia, Kuwait and Iraq.
According to Reuters calculations, the overall adjustment will increase the supply of 1.63 million barrels per day from May next year.
From May 2022, the UAE’s benchmark production will increase from 3.168 million barrels per day today to 3.5 million barrels per day.
The benchmark daily output of Saudi Arabia and Russia will rise from the current 11 million barrels to 11.5 million barrels.