OPEC+ abandons oil policy meeting after failing to reach consensus

OPEC+ ministers called off oil output talks on Monday after the United Arab Emirates last week balked at a proposed eight-month extension to output curbs, meaning no deal to boost production has been agreed.

Saudi energy minister Prince Abdulaziz bin Salman on Sunday called for “compromise and rationality” to secure a deal after two days of failed discussions last week. But on Monday, four OPEC+ sources said there had been no progress and talks were
called off, without a new date being set.

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The failure to agree on Monday means an expected increase in oil output from August will not take place, the sources said, helping to drive up international benchmark Brent crude, which was trading around 1 percent higher at close to $77 a barrel.

Oil prices are at the highest since 2018 and have already prompted concerns inflation could derail a global recovery from the pandemic.

OPEC+ agreed record output cuts of almost 10 million barrels per day (bpd) last year, about 10 percent of world output, as the pandemic hit. They have been gradually relaxed and stand at about 5.8 million bpd.

The UAE, sources said, on Friday accepted a proposal from Saudi Arabia and other OPEC+ members to raise output in stages by about 2 million bpd from August to December but rejected extending remaining cuts to the end of 2022 from a current end date of April.

The UAE is upset about the baseline from which its production cuts are being calculated and wants it raised. Abu Dhabi has invested billions of dollars to increase its production capacity and says its baseline was set too low when OPEC+ originally forged their pact.

On Monday, OPEC+ sources said the UAE’s position was unchanged. They said a ministerial panel chaired by Saudi Arabia and Russia, the Joint Ministerial Monitoring Committtee, needed more time to discuss the issue.

The UAE has said it was not alone in seeking a higher baseline as others, including Azerbaijan, Kazakhstan, Kuwait, and Nigeria, had requested and received new ones since the deal was first agreed last year.

Decisions in OPEC+, which groups the Organization of the Petroleum Exporting Countries with Russia and other big producers, must be unanimous.

Potential outcomes, OPEC+ sources said, include raising output from August, or raising output from August and extending the remaining cuts with a new higher baseline figure for the UAE.

OPEC+ could also go ahead with the deal as is until April 2022 and discuss a new UAE baseline as part of a new deal, the sources said.

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