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
VideoBetter than Crypto? Why central banks are racing to launch digital currencies
Emily Jin discusses the race for governments to regulate and create their own digital currency. Watch the full conversation from Deutsche Welle....
By Emily Jin
VideoBank of Russia Hiked Rates
Elina Ribakova discusses how the spike in Covid-19 cases and new restrictions could affect the Russian economy with Bloomberg's Alix Steel and Guy Johnson. Watch the full vid...
By Elina Ribakova
ReportsSanctions by the Numbers: Spotlight on Venezuela
As Venezuela battles a protracted financial and humanitarian crisis, U.S. sanctions on the country have emerged as controversial. This has sparked debate on whether the increa...
By Jason Bartlett & Megan Ophel
CommentaryWhy Biden Should Extend Vaccine Diplomacy to Sanctioned States Like Venezuela, Iran, and North Korea
Extending vaccine diplomacy to heavily sanctioned countries will allow Washington to both hedge against growing Chinese-Russian influence abroad and help alleviate global huma...
By Jason Bartlett