London/Dubai/Moscow, July 2 (Reuters) OPEC+ will resume negotiations on Monday after failing to reach an agreement on oil production policy for the second day in a row on Friday, as the United Arab Emirates blocked certain aspects of the agreement .
Thestalemate may postpone plans to increase oil until the end of the year to cool oil prices that have soared to a two-and-a-half-year high.
If no agreement is reached, the OPEC+ alliance may maintain stricter production restrictions. The current oil price is around US$75 per barrel, which has risen by more than 40% this year. Consumers need more crude oil to help the world recover from the COVID19 pandemic.
Rising oil prices are fueling global inflation and slowing the economic recovery from the coronavirus crisis. The 4,444 OPECs composed of OPEC, Russia and its allies voted on Friday to increase production by about 2 million barrels per day from August to December 2021, and extend the remaining production cuts to the end of the year. 2022. According to OPEC+ sources, it will not end in April 2022.
The UAE agreed to release more oil to the market, but refused to support the extension of the production cut period.
talks resumed on Monday, OPEC+ said in a statement.
In response to the destruction of oil demand caused by the COVID crisis, OPEC+ agreed last year to reduce production by nearly 10 million barrels per day starting in May 2020, and plans to gradually lift the restrictions by the end of April 2022. The production cut is still effective at about 5.8 million barrels per day.
If the UAE prevents an agreement, the remaining reductions may continue to exist, although the probability of the agreement’s collapse is small, and all countries can pump water as they wish.
Alternatively, the group can agree to increase production until the end of 2021, but postpone the discussion on extending the agreement until after April 2022. OPEC + sources said that the UAE has made this proposal.
OPEC + The source said that the UAE complained that its benchmark (calculating the level of production reduction) was initially set too low. This is a question it raised before, but if the transaction ends in April 2022, it is prepared to tolerate it, but If it lasts longer. . 4,444 OPEC+ sources stated that the UAE hopes to set its benchmark output at 3.84 million barrels per day, compared with 3.168 million barrels per day today.
The UAE has formulated ambitious production plans and invested billions of dollars to increase production capacity. A source familiar with the thinking of the UAE said that the OPEC+ agreement has left about 30% of the UAE’s capacity idle.
The UAE argues that they are not the only country that requires a higher baseline, because since the agreement was first reached last year, other countries such as Azerbaijan, Kuwait, Kazakhstan and Nigeria have requested and received new baselines.
On the eve of this week’s meeting, OPEC+ sources have stated that Russia insists on putting more oil into the market because price increases are driving the growth of rival US shale oil production, and US shale oil production often requires higher prices Can be economical.
OPEC leader Saudi Arabia has adopted a more cautious attitude, saying that due to the mutation of the coronavirus causing a new outbreak, there is still uncertainty in the course of the pandemic, so oil production should be reduced.