RE: OPEC3 Jul 2021 09:43
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Opec and its allies failed to reach an agreement on raising oil production on Friday as talks hit a deadlock for a second day, with the UAE remaining opposed to a deal that does not address concerns over its own output target.
As oil prices traded close to the highest level in three years, around $76 a barrel, the White House flagged the impact of the ongoing rally on US motorists as the global economy rebounds from the initial hit from the pandemic.
The Opec+ group said it would reconvene by videoconference on Monday at 3pm Vienna time, with the meeting likely to be closely watched given rising concerns about inflation across markets.
“The next few days may show how much diplomatic capital the White House wants to extend to prevent triple-digit oil prices,” said Helima Croft at RBC Capital Markets, echoing warnings that crude will probably climb if the group cannot agree to add more production to the market.
Saudi Arabia and Russia had proposed increasing production cautiously by 400,000 barrels each month between August and December, which other countries have broadly supported. They also sought to extend a supply deal among Opec+ producers beyond next April, when it was set to expire, into the latter half of 2022.
But since Thursday the UAE has objected to the prolonging of any deal without re-evaluating its own production allocation, saying that its quota set under the original supply-cut agreement — at the height of the coronavirus crisis in April 2020 — did not account for its maximum output capabilities.
UAE officials have privately felt they have lost out on production revenues by being asked to cut proportionally more than Saudi Arabia, exposing mounting tensions between two traditional Gulf allies.
The next few days may show how much diplomatic capital the White House wants to extend to prevent triple-digit oil prices
Helima Croft, RBC Capital Markets
“The breakdown over which production baseline to use for the supply cuts and the broader risk of the UAE potentially leaving Opec would have seemed unthinkable 72 hours ago,” Croft added. She said the UAE’s push for higher output came after it launched a crude oil benchmark earlier this year. “One wonders whether [that was when] the die was cast,” Croft said.
As some of the world’s biggest listed oil companies retreat from the fossil fuel businesses, Sultan Al Jaber, head of the Abu Dhabi National Oil Company, has been unapologetic about expanding the UAE’s output capabilities.
“We will not leave any opportunity unturned,
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