Page 4 - FSUOGM Week 27 2021

FSUOGM COMMENTARY FSUOGM

OPEC+ plans in disarray as

meeting is cancelled

A date has not yet been set to make up for the missed meeting

OPEC+ MEMBERS of the OPEC+ group downed tools The UAE also has a point in terms of the base-
this week, cancelling their planned July 5 meet- line with Saudi Arabia being given a baseline of
WHAT: ing at the last minute amid growing friction 11mn bpd despite having produced an average
OPEC+ cancelled their between key participants Saudi Arabia and the of 10.38mn bpd during 2018, with October 2018
ministers meeting at the UAE. output running at 10.77mn bpd.
last minute amid growing Riyadh has been pushing for anticipated Saudi oil production has only exceeded
friction between Saudi monthly production increases of 400,000 bar- 11mn bpd twice in history – in November
Arabia and the UAE. rels per day (bpd) to be tied to a commitment 2018 and April 2020 when it hit 12.1mn bpd
to extend the existing supply cut eight months as it launched a price war with Moscow send-
WHY: beyond the current April 2022 end date. Mean- ing prices into freefall. However, state-owned
The UAE is digging its while, the UAE is digging its heels in on an exten- Saudi Aramco maintains that it has a ‘maximum
heels in on an extension, sion pending the upward revision of its reference sustainable capacity’ of 12mn bpd which it has
as it seeks a higher point for cuts. been instructed to increase by 1mn bpd by the
output baseline. Without a consensus among members on Ministry of Energy. Russia also has a baseline of
the next steps, oil production from the group 11mn bpd.
WHAT NEXT: will stay flat, with 5.8mn bpd of output with- Meanwhile, the UAE has undertaken a major
With a consensus, held from the market despite a significant project to add to its reserves and increase capac-
production will remain increase in demand anticipated during the sec- ity, late last year announcing the discovery of
flat, bolstering oil prices. ond half of the year. OPEC anticipates that oil 24bn barrels of oil resources and approving Abu
demand will grow by around 5mn bpd between Dhabi National Oil Co.’s (ADNOC) $122bn
July and December, while S&P Global Platts four-year spending plan. The company is on
has forecast growth of 8.8mn bpd between course to increase oil production capacity from
June and December. the current 4mn bpd to 5mn bpd by 2030.
The current agreement is based on percent- A date has not yet been set to make up for the
age reductions based on October 2018 produc- missed meeting, but member delegations are
tion levels, giving the UAE a baseline of 3.168mn understood to be continuing talks behind the
bpd, but the country’s production capacity has scenes to broker a deal.
now risen to 4mn bpd and it wants this taken With the rift between the Gulf neighbours
into account. appearing sizeable, Iraq has already noted the
While any such adjustment would be a devi- potential for disruption without further negoti-
ation from the course which has brought market ation with Mazhar Muhammed Salih, an adviser
stability and rising prices, Emirati officials have to Prime Minister Mustafa al-Kadhimi telling
noted that the country has had to shut in a dis- the Iraqi News Agency (INA): “In the absence
proportionate amount of production capacity of coordination and understandings between the
– 35% compared with the 22% average among members of OPEC, the beginnings of a price war
other members. will be formed again.” ™

P4 www. NEWSBASE .com Week 27 07•July•2021