July 09, 2021
OPEC Standoff: Resetting market share
The 1 July OPEC meeting ended in deadlock. Although all the major oil producers agreed in principle to collectively boost production by 400,000 barrels per month from August through the end of 2021, they failed to agree on how long the production agreement should last, putting the whole deal on hold. This deadlock represents the latest divide over market share, this time, about how to distribute reopening gains.
The holdout, surprising to some, was the United Arab Emirates, a country has typically over complied (cutting more than mandated), along with its larger neighbour, Saudi Arabia and which has long maintained spare capacity. While the UAE has long had one of the lower fiscal break-even points (the oil price needed to sustain its spending), it has rarely been a holdout.
Producers such as the UAE want to make money from their assets today and set up robust future asset streams that will be robust to the shift to net zero production.
What’s changed is that the UAE (or rather Abu Dhabi, the oil-rich largest emirate) has been investing heavily to boost boosting its production capacity and leveraging its infrastructure. Both measures increase its desire to reset its future production within the group, while it can. This divide within OPEC also comes as the Saudi-Emirati relationship faces several areas of increased competition as both countries face greater urgency to diversify their economies.
The standoff spoiled the recent Saudi narrative of “predictability” in which gradual production increases would maintain the market share of OPEC (and the broader OPEC+ grouping, which also includes, Russia, Kazakhstan and Mexico), helping meet global demand which is increasing despite the latest deadly Covid waves.
Read the full article from The Interpreter.
More from CNAS
-
Semiconductor Imports and U.S. National Security
The Secretary of Commerce has initiated a Section 232 investigation to determine the effects on the national security of imports of semiconductors and semiconductor manufactur...
By Geoffrey Gertz & Caleb Withers
-
AI Diffusion with Paul Scharre
Paul Scharre, AI expert and CNAS Executive Vice President, joins Geoff and Emily to talk about Trump’s AI dealmaking in the Gulf, the rescission of the Biden-era AI diffusion ...
By Emily Kilcrease, Paul Scharre & Geoffrey Gertz
-
Ex-NATO Official: Putin Is ‘Stringing Along Trump’ to Push for Sanctions Relief
Jim Townsend, an adjunct senior fellow at the Center for a New American Security, weighs in on peace talks after the Putin-Zelenskyy-Trump call and whether the U.S. is failing...
By Jim Townsend
-
Ziemba: U.S. Has To Be Ready To Accept Mideast Investments
US President Donald Trump has secured $200 billion in deals during a visit to the United Arab Emirates, according to the White House, as he wraps up his visit to the Middle Ea...
By Rachel Ziemba