By Nneka Nwogwugwu
Saudi Arabia and the United Arab Emirates have reached a compromise deal in a standoff over OPEC+ crude output quotas, according to media reports citing sources within OPEC+.
An OPEC+ source told Bloomberg News on Wednesday that the compromise with Saudi Arabia will see the UAE’s output baseline rise from its current level of about 3.17 million bpd to 3.65 million.
Earlier this month talks between OPEC and its allies led by Russia, a grouping known as OPEC+, fell apart over a dispute that pivoted on individual quotas for pumping crude.
At issue was how much oil Abu Dhabi would be allowed to produce under a proposed deal that sought to add an extra 2 million barrels per day of crude to the market to cool oil prices.
Crude prices have recently soared to their highest levels in two and a half years as economies around the globe – especially more developed ones- cast-off COVID-19 restrictions, boosting demand for energy.
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Global benchmark Brent crude fell by roughly $1 towards $75 per barrel. Both countries are major OPEC producers after Saudi Arabia and the UAE had struck a compromise.
Last year, oil prices crashed after COVID-19 lockdowns gutted global crude demand and Saudi Arabia piled even more pressure onto markets by declaring an oil price war after it could not get its fellow OPEC+ members to agree to deep cuts.
The crash in prices led to escalating geopolitical tensions between Washington and Riyadh, as United States shale oil producers – whose productions costs are far higher than Saudi Arabia’s – faced an existential threat to their existence.
But oil markets stabilised last year after OPEC+ agreed to record output cuts of roughly 10 million bpd. Those curbs have been gradually eased since then and now stand at about 5.8 million bpd.
While most OPEC+ members supported a proposal to unwind the remaining cuts by boosting output by 400,000 bpd every month until the end of next year, the UAE refused to endorse it unless its individual production quota was raised.
OPEC+ has yet to make a final decision on its output policy and it has not yet announced a new meeting date after talks were abandoned this month.
But that boost to the UAE’s baseline potentially opens the door for other OPEC+ members to raise their individual output quotas.
