Discussions between OPEC and its allies to boost oil production and fresh prices were abandoned earlier this month over a dispute that revolved around the amount of crude oil the United Arab Emirates could pump under a new agreement.
Saudi Arabia and the United Arab Emirates have reached a compromise agreement in a deal on OPEC + crude production quotas, according to media reports citing sources in OPEC +.
Earlier this month, talks between OPEC and its allies led by Russia, a group called OPEC +, were sparked by a dispute that turned over individual quotas to pump crude.
At issue was how much oil Abu Dhabi would be allowed to produce in a proposed deal that sought to add an additional 2 million barrels per day of crude to the market to cool oil prices.
Crude oil prices have recently risen to their highest levels in two and a half years as economies around the globe – particularly the more developed ones – return to COVID-19 restrictions, increasing energy demand.
After the Reuters news agency reported that Saudi Arabia and the UAE had made a compromise, the world benchmark Brent crude fell by about $ 1 to $ 75 a barrel. Both countries are major OPEC producers.
Last year, oil prices fell after COVID-19 closures unleashed global demand for crude oil and Saudi Arabia has amassed even more pressure on markets by declaring a war on oil prices. oil after he could not get his OPEC + partners to agree to deep cuts.
The price crash has led to an escalation of geopolitical tensions between Washington and Riyadh, as U.S. shale oil producers – whose production costs are much higher than those in Saudi Arabia – have had an existential threat to their existence.
But oil markets stabilized last year after OPEC + agreed to record production cuts of about 10 million barrels per day. Those curbs have been gradually loosened since then and now stand at about 5.8 million bpd.
While most OPEC + members supported a proposal to slash the remaining cuts by increasing production by 400,000 bpd each month until the end of next year, the UAE has refused to approve it at less than its share. individual production has been increased.
An OPEC + source told Bloomberg News on Wednesday that the compromise with Saudi Arabia will see UAE base production grow from its current level of about 3.17 million bpd to 3.65 million.
OPEC + has yet to make a final decision on its production policy and has not yet announced a new meeting date after negotiations were abandoned this month.
But this push to the UAE baseline potentially opens the door for other OPEC + members to raise their individual production quotas.
There was evidence that global oil markets were tired of rising crude oil prices. Oil was trading lower on Wednesday before news of the Saudi-UAE compromise agreement was reported due to weakening demand from China, the world’s largest oil exporter.
“Traders have begun to understand that oil could become too expensive for too long after China’s mid-year crude oil imports fell by 3% against the same time in 2020,” Rystad Energy analysts wrote in a note to clients Wednesday.
“As China is the world’s largest importer of crude oil, a drop in imports, especially since it is the first in several years, is a significant price signal for the market to weigh the brake pedal. “