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
-
Sanctions by The Numbers: The Russian Energy Sector
Reports
Since 2014, the United States, the European Union (EU), and other like-minded nations have targeted the Russian energy sector with increasingly significant coercive economic m...
By Jocelyn Trainer, Nicholas Lokker, Kristen Taylor & Uliana Certan
-
Sharper: Regulating Technology
Commentary
The pace of technological change presents both immense opportunity for private industry and complex challenges for national security. These technologies, including artificial ...
By Anna Pederson & Julia Arnold
-
Can Europe fund its defense ambitions?
Podcast
The majority of European members of NATO are not spending as much on defense as they agreed to. But that may change as the European Union considers a move to a "war economy." ...
By Rachel Ziemba
-
A New Approach to Sanctions Is Pushing Up Energy Prices and Crimping Russia’s Revenue
Commentary
Heightened U.S. sanctions enforcement has also raised the importance of China as the buyer of last resort for Russia....
By Rachel Ziemba
