Page 11 - MEOG Week 27 2021

MEOG POLICY MEOG

OPEC+ plans in disarray

as meeting is cancelled

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

Week 27 07•July•2021 www. NEWSBASE .com P11