© Reuters. The logo of the Organization of the Petroleum Exporting Countries (OPEC) on its headquarters in Vienna. Photo from Reuters archive.
By Ahmed Ghaddar, Rania El Gamal, and Olesya Astakhova
LONDON/DUBAI/MOSCOW (Reuters) – OPEC+ sources said that an agreement for the group to pump more oil into the market and extend its policy to manage production policy until the end of 2022 depends on the approval of the United Arab Emirates, which opposed the agreement and pushed the talks into a second day.
On Thursday, the UAE blocked an agreement that won the support of the largest producers and Russia to ease oil cuts by two million barrels per day by the end of 2021 and extend the remaining restrictions until December 2022 from April 2022.
OPEC + sources said that the UAE, although it did not oppose the increase in production, says there is a need for the new agreement to recognize that its production has risen from the level at which the cuts were implemented.
The UAE says it had previously agreed to a very low baseline figure as a goodwill gesture and in the hope that the cuts would end in April 2022, which was agreed in April 2020.
OPEC + sources said that the UAE wants the production baseline to be at 3.8 million barrels per day, compared to the current level of 3.168 million barrels per day. This means that the actual reduction amount is reduced.
The UAE has ambitious plans for production growth and has invested billions of dollars to boost production capacity. But the supply agreement leaves about 30% of its production capacity idle, according to sources familiar with Emirati thinking.
To face the severe damage to oil demand due to the Covid-19 crisis, OPEC + agreed last year to reduce production by nearly ten million barrels per day from May 2020, with plans to end these restrictions in stages until the end of April 2022.
The current reduction of about 5.8 million barrels per day, if the UAE completely obstructs the agreement, may remain in force, causing a greater rise in light of a rapid recovery in demand and a shortage of supplies.
Brent crude was trading near a two-and-a-half year high on Friday, at more than $75 a barrel.
(Prepared by Moataz Muhammad for the Arabic Bulletin – Edited by Suha Jado)
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