OPEC+ talks delayed as UAE, KSA flight over oil production

3 December, 2020 12:00 AM printer

DUBAI: OPEC+ talks were delayed for two days to give ministers more time to reach a deal, after a long and tense meeting on oil production broke down without an agreement.

The move, set out in a letter seen by Bloomberg, was the most dramatic sign yet of the deep division inside the cartel after hours of talks on Monday yielded no result. Oil prices, which have rallied on vaccine hopes as well as expectations that OPEC will maintain its current output curbs, slipped on the news, report agencies.

OPEC ministers met on Monday and had been scheduled to talk to their non-OPEC partners on Tuesday. At one point, there had appeared to be a consensus building between ministers yesterday, but the meeting then became unusually fraught. Saudi Arabia’s energy minister, in what appeared to be a gesture of frustration, told others he may resign as co-chair of a key OPEC+ panel.

At stake is the credibility of the cartel whose actions have underpinned the market since the spectacular oil crash earlier this year. The run-up to the meeting saw new cracks emerge in the relationship between the United Arab Emirates—a core part of the group—and other members. The UAE’s national long-term strategy to crank up production is clashing with the cartel’s current strictures.

“The market is underestimating a little bit how serious this is—this is one of Saudi Arabia’s biggest allies,” Amrita Sen, co-founder of consultant Energy Aspects Ltd., told Bloomberg Television. She doesn’t predict a messy outcome this week, but sees tensions persisting into next year. “Despite the disputes, they will get through this one.”

Informal talks are expected to continue by phone before the OPEC+ meeting on Thursday. Ministers are discussing whether to increase production in January as planned or maintain the current level cuts—in one scenario for another three months.

Some members think the market is still too fragile to accept more barrels, while others want to make the most of rising prices to increase production and bolster revenue.

The UAE isn’t overtly opposing an extension of the current output cuts, but is effectively blocking an agreement by trying to attach conditions to a rollover that are almost impossible to meet, according to delegates. The UAE is calling on those who have previously breached their quotas to commit to full compliance before making a deal.

In another sign of the building tension, the UAE was offered the position of co-chair of the OPEC+ monitoring committee that the Saudis may give up, but rejected it, according to a person familiar with the situation.