UAE rejects OPEC plan, allies to extend production pact | Business and Economy News

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The UAE has backtracked on an oil cartel plan by OPEC and allied producing countries to extend the global pact to reduce oil production beyond April 2022, a rare statement that reveals the country’s frustration with the group.

According to the state news agency WAM, the UAE Ministry of Energy described the proposal to extend the deal to 2022 without raising its share of “unfair production in the UAE”.

One of the group’s main oil producers, the United Arab Emirates, wants to increase its production by organizing a competition with the Allies and Saudi Arabia’s heavyweight OPEC, which has led to a tight cap on production.

Video conferencing talks were held on Friday between the 13 OPEC members themselves, followed by a technical meeting and debates between the 23 OPEC Plus members.

But the combined grouping of OPEC Plus members led by Saudi Arabia and non-members, chief among them Russia, failed to reach an agreement on oil production. Negotiations on the dispute will resume on Monday.

The UAE said it supported plans to increase production over the summer, believing the market “had a great need for greater production.”

The country suggested postponing the entire discussion on the extension of the agreement to a later meeting and called for an updated production quota that “reflects our current production capacity.”

On Sunday, Saudi Arabia’s energy minister said the supply pact that would end in April 2022 should continue for longer, Saudi television Asharq reported.

Asharq also quoted the prince as saying that there should be an increase in production to cope with the projected decline in oil supply during the summer period.

Iraqi Oil Minister Ihsan Abdul Jabbar also supported OPEC Plus’ proposal to extend the pact on production limits until December 2022, adding that he hoped that oil would remain at $ 70 a barrel or more until then.

Iraq also agreed to the group’s proposal to increase production by 400,000 barrels a day from August.

At a briefing on Sunday in Baghdad, he said Iraq’s oil exports would be 2.9 million bpd in July, marking full compliance with the current OPEC agreement. The country exported crude at the same rate in June, according to official data.

Lower oil prices

OPEC faces conflicting pressures following last year’s fall in oil prices as the pandemic ended travel and energy consumption.

Heavy production cuts by oil producers prevented prices from falling even more than they did.

Increasing production now, as vaccination campaigns raise hopes of economic recovery, would increase the incomes of producing countries that have seen their budgets hit hard by lower prices. But pumping too soon could undermine the rise in energy prices.

In an interview with CNBC on Sunday, Emirati Energy Minister Suhail al-Mazrouei expressed concern over production restrictions led by Saudi Arabia.

“Everyone sacrificed themselves but unfortunately the UAE sacrificed the most, leaving a third of our production inactive for two years,” he said.

Saudi Arabia has taken on the deepest production cuts and urged caution, saying oil demand and the economic recovery from the pandemic remain fragile around the world.

Division

According to Deutsche Bank analysts, the problem with the talks was “because the UAE raised a last-minute objection to the agreement between Russia and Saudi Arabia.”

“The UAE, which has increased its production capacity since 2018, when individual baselines were established, insisted on raising its baseline by 0.6 million barrels per day (bpd) to 3.8 million bpd, which allows them a unilateral increase in production within the current quota framework “, according to Ole Hansen of Saxobank.

“Negotiations … will be difficult, as OPEC Plus knows that if the UAE is allowed to produce from a different base, other members can protest,” Louise Dickson of Rystad said.

Saudi Arabia’s energy minister said Sunday that no country can use a single month as a base production benchmark, Al Arabiya TV reported.

The Saudi-owned television channel also quoted Prince Abdulaziz bin Salman as saying he was neither optimistic nor pessimistic about OPEC Plus talks that would resume on Monday.

OPEC Plus is essentially faced with acceding to Abu Dhabi’s demands or failing to reach an agreement that could drive up crude oil prices. The unity of the alliance is also at risk, which if broken can trigger a price war.





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