July 09, 2021

OPEC Standoff: Resetting market share

By Rachel Ziemba

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.

  • Podcast
    • October 4, 2022
    A Marshall Plan for Ukraine

    Rachel Ziemba joins NPR's The Indicator From Planet Money to discuss what a Marshall Plan might look like for Ukraine. Listen to the interview from NPR: The Indicator From Pl...

    By Rachel Ziemba

  • Congressional Testimony
    • September 20, 2022
    Under the Radar

    My testimony will address China’s progress in building out alternative payment systems, the strategic implications of growth in China’s alternative payment systems, and recomm...

    By Emily Jin

  • Reports
    • September 19, 2022
    Rewire: Semiconductors and U.S. Industrial Policy

    As the United States considers industrial policy for the first time in decades, it should learn lessons from prior government efforts to shape the semiconductor industry, in t...

    By Chris Miller

  • Commentary
    • The Atlantic Council
    • September 14, 2022
    Sand in the silicon: Designing an outbound investment controls mechanism

    Recent congressional efforts to establish new authorities to regulate outbound investment have revived a long-simmering debate in Washington about the economic and security ri...

    By Emily Kilcrease & Sarah Bauerle Danzman

View All Reports View All Articles & Multimedia