Today, Friday, the “OPEC Plus” (OPEC) alliance resumed talks on increasing oil production after the UAE blocked an agreement yesterday, which led to a confrontation that could lead to delaying plans to pump more crude until the end of the year, to calm prices that rose to the highest level in two years. And half a year.

In the absence of an agreement, the “OPEC Plus” alliance may maintain tighter production restrictions, while oil prices are currently trading at about $75 a barrel, with an increase of more than 40% since the beginning of the year, at a time when consumers want more crude to support the global recovery from the Covid pandemic. -19.

Increased oil prices contribute to global inflation, slowing the economic recovery from the pandemic.

The UAE suspended an agreement backed by the largest producers (Saudi Arabia and Russia) to increase production by two million barrels per day by the end of 2021, and extend the rest of the existing restrictions until the end of 2022 instead of ending them in next April.

In order to face the severe damage to oil demand due to the Covid-19 crisis, “OPEC Plus” agreed last year to reduce production by approximately 10 million barrels per day as of May 2020, with plans to end


these restrictions in stages until the end of April 2022, amounting to The current reduction is approximately 5.8 million barrels per day.

And if the UAE obstructs reaching any agreement, those remaining reductions will likely remain in effect, and there is a small possibility of the agreement collapsing, and all countries may pump crude as much as they want.

Sources in "OPEC Plus" told Reuters that the UAE does not oppose the principle of increasing the group's production, but it wants its production to rise, and says that its baseline - which is the level of production from which the cuts are calculated - was originally very low, something that it was prepared to do. To turn a blind eye to him if the deal expires in April.

The sources indicated that the UAE wants the baseline for its production to be set at 3.8 million barrels per day, compared to the current level of 3.168 million barrels per day.

If the baseline changes, it could mean that more oil will be added to the market than planned, or the rest of the producers will have to accept a smaller increase.

Emirates plans

The UAE has ambitious plans for production growth, and has invested billions of dollars to boost production capacity, but the supply agreement leaves about 30% of its production capacity idle, according to Reuters quoted "sources familiar with Emirati thinking."

A source in "OPEC Plus" said that the UAE says that it is not the only one requesting a higher baseline, as other countries such as Azerbaijan, Kuwait, Kazakhstan and Nigeria have adjusted the level at which the cuts are implemented since the start of the agreement last year.

During the prelude to the meeting this week, sources in "OPEC Plus" said that Russia insists on pumping more oil into the market, as high prices encourage the growth of rival US shale crude production, which usually needs higher prices to be feasible.

Saudi Arabia (the largest producer in OPEC) is adopting a more cautious approach, and says that fewer barrels should be pumped given the continuing uncertainty about the course of the pandemic, with virus strains causing new outbreaks in several countries.