UAE pushes back OPEC and allied 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 UAE,” according to the state-run WAM news agency.

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

Video-conference talks were held between the 13 members of OPEC proper 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 reach 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.”

Later Sunday, Saudi Arabia’s Energy Minister said the supply pact which was due to end in April 2022 should continue for longer, Saudi television Asharq reported.

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

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

Iraq has 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 the economic recovery from the pandemic remain fragile globally.

Division

The hitch in the talks came “because the UAE raised a last-minute objection to the Russia-Saudi deal reached earlier,” according to analysts at Deutsche Bank.

“The UAE, which has increased its production capacity since 2018, when the individual reference levels were set, insisted that their reference level 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.

Saudi Arabia’s Energy Minister said on Sunday that no country can use a single month as a baseline production benchmark, Al Arabiya TV reported.

The Saudi channel also quoted Prince Abdulaziz bin Salman as saying he was neither optimistic nor pessimistic about the resumption of OPEC Plus talks on Monday.

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.