After a series of meetings over the holiday weekend, OPEC+ failed to reach an agreement or schedule its next meeting. The current standoff is rooted in the United Arab Emirates desire for a higher baseline production level under the OPEC+ agreement.
The plan was for outputs to increase over the summer due to market demand increase, and the coalition agreed to add 2 million barrels per day from May to July. However, talks broke down when it came to production over the next eight months. According to Bloomberg, the group planned to extend production curbs from April to December 2022, which the UAE rebuked based on its quota.
The UAE, according to the Emirati Ministry of Energy, deemed this weekend’s proposal unfair and wanted a production quota that reflects its current production capacity. According to the Associated Press, the UAE is currently producing around 2.7 million barrels per day under the OPEC+ agreement but previously produced around 3 million.
Since the COVID-19 pandemic disrupted the oil markets in 2020, OPEC+ has met monthly to evaluate production. In the beginning, the group slashed 9 million bpd to prevent prices from additional collapse brought about by forced lockdowns and lack of international travel. Since then, the alliance has slowly increased production back to 37 million bpd — about 6 million bpd below production levels at the start of the pandemic.
Supply limitations and vaccine news pushed crude oil prices back to pre-pandemic levels of $60 per barrel earlier this year. But the market remains sensitive, and with OPEC+ unable to reach a deal, oil markets have traded higher: crude oil rose 1.5% to $76.32 per barrel and international Brent crude rose 1.3% to $77.20 per barrel.
Industry analysts are concerned that with no set date for the next meeting, the group could fracture and trigger greater price volatility. As countries and economies attempt to rebound following pandemic lockdowns, demand for oil and gas is crucial for business activity, making certainty and the ability to plan production of utmost importance.
Maria Suarez, Director Government Affairs, writes about industry-specific policies for the Energy Workforce & Technology Council. Click here to subscribe to the Council’s newsletter, which highlights sector-specific issues, best practices, Council activities and more.