Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman Al-Saud speaks during an emergency virtual meeting of OPEC and non-OPEC countries following the coronavirus disease (COVID-19) outbreak in Riyadh, Saudi Arabia, on 9th 2020.
Saudi Press Agency | Reuters
LONDON – A meeting between the oil producing group OPEC and its partners aimed to broker a deal on crude oil production after the group unexpectedly failed to reach an agreement last week has been canceled.
The Energy Alliance, often referred to as OPEC +, voted on Friday on a proposal to increase oil production between August and the end of the year by around 2 million barrels per day at monthly rates of 400,000 barrels per day. She also suggested extending the remaining production cuts until the end of 2022.
The UAE turned down those plans, however, blocking an agreement to keep oil markets pending over the weekend for the second year in a row.
OPEC + should meet on Monday at 2 p.m. London time for crisis talks via video conference. However, after a two-hour delay, Reuters said the meeting had been postponed, citing two sources.
The reports were later confirmed by an OPEC communique stating that “the date for the next meeting will be set in due course”. Bloomberg also reported that this meant that OPEC + would continue with production quotas at current levels.
“It wasn’t a good deal for us,” UAE Energy and Infrastructure Minister Suhail Al Mazrouei told CNBC’s Hadley Gamble on Sunday. He added that while the UAE was ready to support a short-term increase in oil supplies, it wanted better conditions through 2022.
In a conversation with the Saudi television broadcaster Al Arabiya, Saudi Arabia’s energy minister, Abdulaziz bin Salman, called for “compromise and rationality” on Sunday in order to reach an agreement on Monday, Reuters reported.
Dominated by crude oil producers from the Middle East, OPEC + agreed massive cuts in crude oil production to prop up oil prices in 2020 when the coronavirus pandemic coincided with a historic shock in fuel demand.
Under the leadership of Saudi Arabia, a close ally of the UAE, OPEC + has since initiated monthly meetings to steer production policy.
It has sparked a rare public confrontation between the United Arab Emirates and its longtime regional ally Saudi Arabia, the de facto leader of OPEC. The dispute comes as energy market participants eagerly await the political direction likely to shape crude oil markets into next year.
In response to the reports, John Kilduff, founding partner of Again Capital, said that “OPEC solidarity has been broken today”.
“The pandemic kept them together and now the post-pandemic is breaking them apart. The UAE are sticking to their guns because they want their baseline to be raised. They want to be able to produce more, ”he told CNBC via email.
“It’s huge because there won’t be any additional output in the market and it will be really tight,” he added.
Following news of the shift, the international benchmark crude oil futures of the Brent variety traded at $ 76.76 a barrel, up about 0.8% for the session, while the futures on US West Texas Intermediate traded at 75 .77 USD was down, about 0.63% more.
Oil prices rose more than 45% in the first half of the year, aided by the introduction of Covid-19 vaccines, a gradual easing of lockdown measures, and massive OPEC + production cuts.
Analysts had expected the Energieallianz to increase supply by around 500,000 barrels per day from next month.