UAE pushes back OPEC and allies’ plan to extend production pact | Business and Economy News

The UAE has pushed back a plan by the oil cartel of OPEC and allied producing countries to extend the global pact to cut oil production beyond April 2022, a rare statement revealing the country’s frustration with the group.

The UAE’s energy ministry called the proposal to extend the deal for all of 2022 without increasing its production quota “unfair to the United Arab Emirates,” according to the state-run WAM news agency.

One of the group’s largest oil producers, the UAE is looking to ramp up production – setting up a contest with OPEC ally and heavyweight Saudi Arabia, which has led a campaign to keep strict control of production.

Video-conference talks were held between the 13 members of OPEC proper led by Saudi Arabia on Friday, followed by a technical meeting and discussions among the 23 members of OPEC Plus.

But the combined group of OPEC Plus members led by Saudi Arabia and non-members, foremost among them Russia, failed to come to an agreement on oil production. Negotiations on the dispute are expected to resume on Monday.

The UAE has said it supports plans to increase production over the summer, saying the market “urgently needs higher production.”

The country suggested postponing any discussion of extending the agreement to a later meeting and requested an updated production quota that “reflects our current production capacity.”

Meanwhile, Iraq has backed OPEC Plus’ proposal to extend the pact on production restrictions until December 2022, Oil Minister Ihsan Abdul Jabbar said, adding that he expected the deal. that oil prices remain at $ 70 a barrel or more until then.

Iraq also accepted a proposal that the group should increase production by 400,000 barrels per day from August.

Speaking at a press briefing in Baghdad on Sunday, he said Iraq’s oil exports will hit 2.9 million barrels per day in July, marking full compliance with the current deal. OPEC. The country exported crude at the same rate in June, according to official figures.

Fall in the price of oil

OPEC faces conflicting pressures after falling oil prices last year as the pandemic wiped out travel and energy use.

Sharp cuts in production by oil producers kept prices from collapsing even more than they did.

Raising production now, as vaccination campaigns fuel hopes of economic recovery, would increase the incomes of producing countries which have seen their budgets hit hard by falling prices. But pumping too much too soon could undermine the rebound in energy prices.

In an interview with CNBC on Sunday, UAE Energy Minister Suhail al-Mazrouei expressed concerns over Saudi-led production restrictions.

“Everyone sacrificed but unfortunately it was the United Arab Emirates that sacrificed the most, making a third of our production inactive for two years,” he said.

Saudi Arabia has assumed the largest production cuts and called for caution, saying demand for oil and economic recovery from the pandemic remain fragile globally.

Division

The snag in the talks came “from the fact that the United Arab Emirates raised a last-minute objection to the Russia-Saudi deal reached earlier,” according to analysts at Deutsche Bank.

“The UAE, which has increased production capacity since 2018 when individual baselines were set, insisted that their baseline be raised by 0.6 million barrels per day (bpd) to 3.8 million bpd, allowing them a one-sided increase in production within the current quota. framework, ”according to Ole Hansen of Saxobank.

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

OPEC Plus is essentially faced with a choice between complying with Abu Dhabi’s demands or not reaching a deal that could drive crude prices up sharply. The unity of the alliance is also threatened, which, if broken, could potentially trigger a price war.