Page 4 - AsianOil Week 29 2021

AsianOil ASIA-PACIFIC AsianOil

Cartel compromise: OPEC+

members reach agreement

The world’s key oil-producing group came to an agreement this
week to avoid a potential supply shortage, but with compromises

made, OPEC+ has created another potential headache

COMMENTARY THE OPEC+ group this week reached an agree- extend the existing supply cut, while the Emir-
ment that will result in increased oil production ates had sought an upward revision of its refer-
as five members saw their baseline output levels ence point for cuts before it would agree to any
WHAT: raised after tense negotiations. extension.
Both Saudi Arabia and Under the agreement, the members will col- This week’s deal sees both parties get what
the UAE managed to lectively ease their production cuts by 400,000 they wanted while apparently avoiding the
get what they wanted barrels per day (bpd) each month from August potential banana skin of a wholesale push to lift
with OPEC+ members and push back the current April 2022 end date baseline production levels.
agreeing to extend the until the end of that year. At this rate, it will take In May, the reference levels of the group’s two
deal to ease cuts while nearly 15 months for OPEC+ to increase pro- top producers, Saudi and Russia, will increase
higher baseline levels duction by the 5.8mn bpd it is still withholding by 500,000 bpd to 11.5mn bpd, with the UAE’s
were announced for the under the agreement reached in early 2020 as rising by 332,000 bpd to 3.5mn bpd as Iraq
biggest producers. they scrambled to balance the market. and Kuwait also receive uplifts of 150,000 bpd
Speaking to Russia 24, Russia’s energy min- each, taking their baselines to 4.803mn bpd and
WHY: ister Alexander Novak said: “Today we made a 2.959mn bpd respectively.
Riyadh’s intention was decision for the market to restore production to
to maintain adherence a pre-crisis level.” Rhetoric
to the deal while the UAE Meanwhile, from May 2022, the baseline For the UAE, the baseline production level is of
had complained that its production levels of the group’s five largest pro- great relevance. Its current 3.168mn-bpd level is
2018-influenced baseline ducers will rise by a combined 1.632mn bpd. The based on October 2018 output, but Abu Dhabi
was no longer relevant. group’s next meeting is scheduled for September in particular has invested heavily in expanding
1 with a thorough review of the deal planned for capacity, which now stands at 4mn bpd.
WHAT NEXT: December. The country’s officials have complained about
OPEC+ will continue The news marks a significant compromise the shut in of a disproportionate level of output
adding 400,000 bpd of oil following a breakdown in talks two weeks ago – 35% – compared to other members – 25% on
production each month as Saudi Arabia and the UAE dug their heels in. average.
until the end of 2022 with Riyadh had been pushing for the monthly pro- Abu Dhabi National Oil Co. (ADNOC) has
the new base levels to be duction increases to be tied to a commitment to embarked on a $122bn four-year programme
implemented in May.

P4 www. NEWSBASE .com Week 29 22•July•2021