Image credit: mantaphoto/iStock via Getty Images
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
-
Turkey’s economy will get ‘tighter and tougher,’ says advisory firm
Rachel Ziemba of Ziemba Insights says the governor of the Central Bank of Turkey is trying to front-load monetary policy adjustments in an effort to avoid making things worse....
By Rachel Ziemba
-
Unilever Mulling Over Whether It Will Leave Russia
The multinational company, Unilever, is deciding on the future of its business operations in Russia. This comes after new management has taken over. The World’s Marco Werman s...
By Rachel Ziemba
-
As China Tensions Bubble, a New Economic Weapon of Choice Has Emerged
The Russia export restrictions epitomize the highs and lows of this new regime....
By Daniel Silverberg & Elena McGovern
-
Is the oil market ready to say goodbye to King Dollar?
The G7-led coalition’s price cap imposed on Russian crude is set to be tested as oil prices rise. At the same time, the greenback’s supremacy in global oil trade is being chal...
By Rachel Ziemba