Top oil producers agree on modest output boost from August

By : AFP

Date: 18 July 2021 2:01pm WAT

(FILES) In this file photo taken on May 16, 2004 (FIELS) -- File picture shows an Aerial view of the Balal offshore oil platform in the Gulf waters, in the Gulf on the edge of Qatar's territorial waters on May 16, 2004. Under threat of US sanctions, European oil firms Total, Shell, Statoil and Eni have pledged to stop investing in Iran in what amounts to a "significant setback" to Tehran, a US official said September 30, 2010. AFP PHOTO/Behrouz MEHRI - OPEC members and other oil-producing countries convene in Vienna this week December 2018 to discuss cutting their output targets, torn between plunging oil prices and pressure from the United States to keep prices low. Under the watchful eye of major producers such as Saudia Arabia and Russia, delegates from both the Organization of Petroleum Exporting Countries and around 10 other non-OPEC members -- which together account for more than half of total global output -- will first hold preparatory meetings earlier in the week and then full plenary sessions on Thursday and Friday. (Photo by Behrouz MEHRI / AFP)

The world’s leading oil producers agreed on Sunday to continue to modestly boost output from August, after the United Arab Emirates blocked a deal earlier this month.

An OPEC+ meeting agreed to raise output by 400,000 barrels per day (bpd) each month from August to help fuel a global economic recovery as the pandemic eases, the Vienna-based group said in a press statement.

The grouping will “assess market developments” in December, it said. The deal also extends a deadline on capping output from April 2022 to the end of 2022.

Earlier in July, negotiations of OPEC+ members on easing production cuts became deadlocked due to a row between the world’s largest oil exporter Saudi Arabia and brash neighbour the United Arab Emirates.

Since May, the 23-member grouping, which also includes Russia, had raised oil output bit by bit, after slashing it more than a year ago when the coronavirus pandemic crushed demand.

The aim was to return to pre-pandemic production levels, with the alliance still pumping 5.8 million bpd less than it was before the pandemic.

‘Consensus building’
In a rare challenge to OPEC leader Saudi Arabia, the UAE rejected the proposed deal earlier this month as “unjust,” leading to a stalemate.

But in a compromise, Sunday’s discussions agreed to adjust output quotas next May for the UAE, Iraq, Kuwait, Russia and Saudi Arabia itself, meaning their actual cuts will be less.

Saudi Energy Minister Abdulaziz bin Salman, who chairs the OPEC group, declined to say how the quotas were set and beneficiaries chosen, saying it had been part of “consensus building”.

Observers had expected a deal.

“A flurry of talks were held on Saturday to try and close the gap,” tweeted Herman Wang, an editor of S&P Global Platts, which specialises in coverage of the energy industry.

Oil prices — which had already been sliding owing to concerns about the global economy — plummeted in April 2020 as coronavirus spread around the world and battered global consumption, transport and supply chains.

OPEC+ last year decided to withdraw 9.7 million bpd from the market and to gradually restore supplies by the end of April 2022. Benchmark oil prices rebounded as a result.

Economic rivalry was at the heart of the feud between OPEC members as the Gulf states try to cash in on their vast oil reserves as they face the beginning of the end of the oil era.

Disagreements between Saudi Arabia and UAE — once inseparable allies — are usually resolved behind palace walls and rarely spill into the open.

Ministers from OPEC+ countries have gathered frequently since the spread of the new coronavirus to assess the market with the next meeting scheduled for September 1, according to Sunday’s statement.