An OPEC+ deal to release more oil to the market and extend its supply management policy to the end of 2022 hinges on agreement from the United Arab Emirates (UAE), which has opposed the deal and pushed talks into a second day, OPEC+ sources said.
The UAE on Thursday effectively blocked a deal agreed by top producers Saudi Arabia and Russia to ease oil cuts by 2 million barrels per day (bpd) by the end of 2021 and extend the remaining cuts to December 2022 from April 2022.
OPEC+ sources have said the UAE – though it did not object to the output increase – is arguing that the new deal needs to acknowledge that the UAE has higher production from which cuts are being made.
It says it had previously agreed to a very low baseline figure as a gesture of goodwill and in the hope that the cut would end in April 2022, as was agreed in April 2020.
OPEC+ sources said the UAE wants to have baseline production set at 3.8 million barrels per day versus the current 3.168 million bpd. A higher baseline means a lower actual cut.
The UAE has ambitious production growth plans and has invested billions of dollars to boost capacity. The supply pact, however, has left about 30% of UAE capacity idle, according to sources familiar with UAE thinking.
Responding to oil demand destruction caused by the COVID crisis, OPEC+ last year agreed to cut output by almost 10 million bpd from May 2020, with plans to phase out the curbs by the end of April 2022.
Cuts now stand at about 5.8 million bpd and, should the UAE fully block the deal, could remain in place and cause a further spike in oil prices amid quickly recovering oil demand and a shortage of crude.
Brent crude was trading close to 2-1/2 year highs on Friday at more than $75 a barrel.
