OPEC and its allies agreed to gradually bring more oil to the market, ending a two-week feud between Saudi Arabia and the United Arab Emirates.
The unusually public dispute that put the unity of the cartel to the test was resolved in a classic compromise – with Riyadh meeting Abu Dhabi halfway through its demand for a more generous production cap.
“Building consensus is an art,” Saudi Energy Minister Prince Abdulaziz bin Salman told reporters after the meeting. The successful deal shows that “OPEC+ is here to stay”.
Under the agreement, the cartel will increase production by 400,000 barrels per day every month from August until the halted production is fully restored. The deal will also give the UAE and several other countries higher baselines against which their production cuts will be measured, from May 2022, according to a statement from the group.
The UAE’s level was raised to 3.5 million barrels per day, below the 3.8 million it initially demanded but above the previous baseline of 3.2 million.
The truce between the two longtime allies will ease the looming supply shortage and reduce the risk of an inflationary oil price spike. It also ends a diplomatic spat that has upset traders as the battle between the two longtime allies threatened to unravel the broader agreement between the Organization of the Petroleum Exporting Countries and its allies, which would support the recovery of crude prices. has supported.
The multi-faceted agreement means several things for the oil market. It will give consumers a clearer picture of how quickly OPEC+ will restore the 5.8 million barrels per day production it has still held back since deep budget cuts were implemented last year in the early stages of the pandemic.
The basic adjustments will not change the pace of monthly production increases of 400,000 barrels per day when they come into effect next year, Prince Abdulaziz said. The group will meet every month and can adjust the schedule as needed, he said.
It also resolves longstanding grievances that have put OPEC+’s unity to the test since late 2020. The UAE blocked an agreement earlier this month, arguing that the way the quota was calculated was unfair because it did not reflect an expensive expansion in the country’s industry.
The spat was particularly bitter and tensions extend beyond oil diplomacy amid growing economic rivalry between Abu Dhabi and Riyadh. Each country’s ministers used media interviews to argue their case, evoking memories of the price war between Saudi-Russia in 2020 as well as previous threats by the UAE to leave the cartel.
With a successful deal in their pocket, both countries emphasized the strength and kindness of their relationship.
“The UAE is committed to this group and will always cooperate with it,” Energy Minister Suhail Al-Mazrouei told reporters after the meeting. He thanked Saudi Arabia and Russia for keeping OPEC+ together and fostering constructive dialogue that made a deal possible.
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