Today, OPEC's negotiations will continue since the group could not come to a general agreement on oil production last Friday. The reason for this was the disagreement of the United Arab Emirates.
It is a possibility that the confrontation between the countries may postpone plans for pumping oil until the end of the year. However, the group agrees that it is time to reduce oil prices, which have soared to highs.
If an agreement is not met, the OPEC+ alliance could maintain tighter production restrictions. Currently, oil prices are about $ 75 per barrel, which is 40% higher than last year.
The growing oil prices contribute to the growth of inflation, slowing the economic recovery of the OPEC+ oil-exporting countries. On Friday, Russia and its allies voted to increase production by almost 2 million barrels per day from August to December 2021. The remaining cuts should be extended until the end of 2022, and not until April 2022, as previously agreed.
The UAE agreed to increase production but refused to support the extension of the reduction.
Last year, production was reduced by 10 million barrels per day since May. It was planned to gradually cancel the restrictions in the plans by the end of April 2022. Now, the reduction is about 5.8 million barrels per day.
If the UAE does not sign the agreement, the remaining cuts are likely to remain in force, but there is a possibility that the pact will collapse and all countries will be able to pump as much as they want.
The UAE has proposed to increase production until the end of 2021, but it is not yet discussing the extension of the contract for the previous reduction until April 2022.
According to OPEC+, UAE complained that its level, from which any cuts are calculated, was initially set too low. Earlier, they tried to raise it to the production level of 3.84 million barrels per day from 3.168 million barrels per day, which is now set, but they resigned themselves.
It is worth noting that the country has very ambitious production plans, investing billions of dollars in increasing production capacity. But based on the OPEC + agreement, they have the right to invest only about 30% of the capacity.
The UAE said that they are not the only ones who would like to improve the basic conditions: Nigeria, Kazakhstan, Kuwait, and Azerbaijan asked for and received new basic conditions after the initial agreement. Accordingly, the UAE would not want to feel flawed.
It is insisted to release more oil to the market because rising prices stimulate the growth of competing shale production in the US, which, as a rule, requires higher prices to be economically profitable.
Meanwhile, Saudi Arabia approached this issue more cautiously, saying that it is better to issue less, based on the various blocking countries.