Oil officials failed for a second day on Friday to resolve a dispute over quotas that prevented OPEC, Russia and their allies from reaching an agreement on raising production.
Members of OPEC Plus, the oil producers’ group, will resume their negotiations on Monday, they said.
OPEC Plus, which curtailed production last year when prices plummeted because of the global economic slowdown caused by the pandemic, had been leaning toward an increase in production by 400,000 barrels a day each month for the rest of this year, beginning in August. Also on the table was a proposal to extend the current production agreement which will expire at the end of April, for the rest of 2022.
But the talks, which opened on Thursday, were tripped up when the United Arab Emirates insisted on what would amount to a substantial increase in its production quota if OPEC Plus extended the output agreement.
Saudi Arabia, which along with Russia has come to dominate the group, says revising the quotas — the country-by-country rules that govern how much oil each is allowed to produce — would lead to chaos because other countries would also insist on new deals.
The tensions are an indication that increasing demand for oil, and rising oil prices, can test the cohesion of OPEC Plus. Producers like the United Arab Emirates and Iraq want to make sure they don’t miss out on opportunities to sell more oil.
Since late last year, oil prices have risen about 85 percent as global economies have started to revive from the impact of the coronavirus pandemic. During this time, OPEC Plus has kept a tight leash on production.
“A disorderly return of that output could end the oil price rally,” wrote Helima Croft, head of commodities at RBC Capital Markets, in a note to clients. On the other hand, a failure of the group to agree on production increases in the coming days may drive prices up. Already some analysts say $100-a-barrel oil is a possibility.
So far, the markets have largely shrugged off the dispute. On Friday, Brent crude, the international benchmark, rose 0.3 percent to $76.14 a barrel.
The dispute with the United Arab Emirates is of particular concern for the group and its de facto leader, Saudi Arabia. The United Arab Emirates has big aspirations to increase its oil output and otherwise expand its petroleum industry along with the rest of its economy. For several months, these ambitions have bumped up against Saudi-led production restraints.
Analysts say the United Arab Emirates has become increasingly frustrated with its position in OPEC Plus.
“They have made it very clear that their ambitions are to increase production, and they somehow think that no one is listening to them,” said Amrita Sen, head of oil markets at Energy Aspects, a research firm.
The Persian Gulf country, whose oil is almost entirely produced by Abu Dhabi, is taking a bigger hit — a reduction of close to one-third of its capacity — than other OPEC Plus producers.
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July 02, 2021 at 07:23PM
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OPEC Plus, failing to agree on oil production levels, will try again on Monday. - The New York Times
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