The energy ministers of the Organization of "OPEC" (OPEC) and the "OPEC Plus" (OPEC +) alliance continue to meet for the third day in a row, in an attempt to reach an agreement on increasing production after they failed to agree on last Thursday and Friday.
The 23 oil-exporting countries of the "OPEC Plus" alliance will meet again today, Monday, to find a way out, after Friday's failure to reach an agreement to set production quotas, starting in August.
Talks between OPEC countries and their allies outside the cartel will resume, a day after the UAE rejected a plan being negotiated as "unfair", in an escalation of the dispute that could impede the recovery of the crude market after the Corona pandemic.
The proposed plan provides for an increase in oil production by 400,000 barrels per day every month from August to December, so that the additional amount of oil put on the market by the end of the year will reach two million barrels per day.
This is in line with the general strategy pursued by “OPEC Plus” since May, which requires gradually increasing production after reducing it sharply with the massive decline in demand when the Corona virus began to spread.
This strategy has been somewhat successful, as oil prices rebounded to reach about $75 per barrel for the two reference crudes, Brent North Sea and West Texas Intermediate, with an increase of 50% since the beginning of the year, a level similar to what prices were in October 2018, although the countries seemed Agreeing with this proposal, but it was the question of the extension that sparked a controversy.
'unfair' plan
The OPEC Plus alliance pledged in April 2020, when crude prices fell in the wake of the first wave of the epidemic, to withdraw 9.7 million barrels per day from the market, to be pumped back gradually during the period until the end of April 2022, but this deadline now appears Very short in light of the current pace of production increase, as the coalition countries are still deducting 5.8 million barrels per day from their production.
This prompted the proposal to extend the agreement currently in force until December 2022, an option that clashes with the opposition of Abu Dhabi.
While Saudi Arabia and Russia support extending the agreement as is until December 2022, the UAE wants to discuss an increase in production levels before agreeing to an extension beyond April.
Yesterday, Sunday, the UAE Minister of Energy and Infrastructure, Suhail Al Mazrouei, said during a television intervention on Sky News Arabia, that the UAE's demand is justice only in the new agreement after April.
The Ministry of Energy announced that the UAE does not mind extending the agreement if necessary, but it requested a review of the base points ratios for the reduction to ensure fair quotas for all members upon extension, and the UAE insists on raising the base production line by 0.6 million barrels per day to 3.8 million barrels, considering that the ratio The current set as of October 2018 does not reflect its full production capacity.
Saudi denunciation
However, Saudi Energy Minister Prince Abdulaziz bin Salman denounced the UAE's departure from consensus, and said that the Saudi-Russian proposal to extend the current oil production cut agreement was accepted by all countries except the UAE.
The Saudi Energy Minister added, in statements to Saudi media, that no country can take the level of its production in one month as a reference.
He confirmed that he has participated in the "OPEC" meetings for 34 years, and during this period he did not witness a request like the request of the UAE, and Saudi media quoted the Saudi Minister of Energy as saying that the consensus in the "OPEC Plus" group exists, except for one country.
The Saudi Energy Minister questioned the reasons why a country, which had reservations, kept silent about its previous expressions all this time.
difficult equation
It was this disagreement that thwarted the first round of meetings last Thursday, and then the Friday meeting between members of a group that usually witnesses differences between Saudi Arabia and Russia.
And Halima Croft, an analyst with RBC, said in a note, that "the possibility of the absence of an agreement, and even of the UAE's exit from OPEC, has increased significantly," as it seems difficult for the coalition to accept the UAE's request without opening The door to chaos.
Kepler analysts commented, "What was supposed to be a relatively calm meeting for OPEC Plus turned into a very long and uncertain meeting."
OPEC Plus faces a difficult equation between an actual but fragile recovery in demand, the expected return of Iranian exports, and the current high prices that displease some large consumers such as India, but the alliance is accustomed to differences and was able at the beginning of last year to overcome a major dispute between Moscow and Riyadh that sparked a price war. Short but intense.