Page 4 - FSUOGM Week 49

FSUOGM COMMENTARY FSUOGM

OPEC+ strike deal on 500,000 bpd

supply hike new year

OPEC+ has reached a compromise deal to restore 500,000 bpd of oil supply,

but cracks in the alliance are widening

GLOBAL OPEC and its partners have hammered out a Friction among allies
deal to bring some 500,000 barrels per day (bpd) The announcement of a deal follows well-pub-
WHAT: of oil supply back on stream next year, after licised friction between OPEC’s two key mem-
OPEC+ will bring meeting for talks on December 3. bers, Saudi Arabia and the UAE. The latter have
500,000 bpd of oil supply The agreement is a compromise between grown frustrated with the failure of Iraq and
back online in January, those members that had wanted to stick closer other members to meet their quotas.
and potentially make to the original plan of restoring 1.9mn bpd The UAE also wants greater decision-making
similar increases on a of production on January 1, and those that power over its own upstream strategy, having
monthly basis after that. had preferred to maintain current cuts for recently unveiled a $122bn five-year investment
longer, in light of weaker oil demand as a plan to expand production. Last month there
WHY: result of renewed coronavirus (COVID-19) were even rumblings that the UAE was consid-
The deal is a compromise lockdowns. ering exiting the alliance, although Energy Min-
between those members that The new agreement is flexible, allowing ister Suhail Al-Mazrouei later downplayed these
wanted to bring back much OPEC+ to bring back up to a further 500,000 reports, reaffirming the Gulf state’s commitment
more production and those bpd on a monthly basis after January. This means to the oil cartel.
who wanted to maintain the original 1.9mn bpd increase planned for Jan- The UAE initially refused to sign up for the
current cuts for longer. uary could be achieved in April. deal unless quota-busting members including
“The market should take comfort [from] Iraq, Nigeria and Russia were held to account
WHAT NEXT: the idea that we have all of the tools in our and forced to make the promised, but as yet
OPEC+ will be able to kit and will release them drip by drip as we largely undelivered, compensatory cuts.
respond to changing see how the market behaves,” Saudi Energy In October, OPEC members Angola, Congo
market conditions more Minister Prince Abdulaziz bin Salman (Brazzaville), Equatorial Guinea, Gabon, Iraq,
quickly, but potential Al-Saud told reporters on the sidelines of Nigeria and the UAE committed to a combined
monthly adjustments the Vienna summit. “The market should. 1.054mn bpd in compensatory cuts for Septem-
create a lot of It’s a sensible way of being very careful and ber-December, with a further 586,000 bpd com-
uncertainty. diligent.” pensation required but unaccounted for in their

P4 www. NEWSBASE .com Week 49 09•December•2020