July 24, 2021

Oil: the rag is burning between OPEC + producers

Saudi Energy Minister Abdelaziz bin Salman (left) alongside his UAE counterpart Souheil al-Mazrouei at a summit in Abu Dhabi on energy sustainability on January 14, 2020 (AFP / KARIM SAHIB)

The 23 members of the Organization of the Petroleum Exporting Countries (OPEC) and their ten allies via the OPEC + agreement still had not resumed their group discussions on Monday, with parties activating behind the scenes to try to get out of the crisis. dead end.

The ministerial summit was to resume by videoconference at 1:00 p.m. GMT (3:00 p.m. in Paris and Vienna, at the cartel headquarters) between the oil producers’ club, but it still had not started at 2:30 p.m. GMT, told the Minister. AFP a source close to the cartel.

Faced with the discontent of the United Arab Emirates, in a hurry to increase their production and who denounced on Sunday an “unfair” draft agreement, bilateral talks were underway before a resumption of trade at twenty-three, according to comments from several market watchers.

A plan is on the table: to increase oil production by 400,000 barrels per day each month between August and December, for a total of 2 million barrels daily put back on the market by the end of the year.

This strategy is part of what has been the strength of the cartel’s policy since May: gradually reopening the black gold tap after having tightened it very strongly at the start of the pandemic in the face of a moribund asks.

Evolution of global oil demand and projection over the period following the Covid-19 pandemic (AFP /)

Evolution of global oil demand and projection over the period following the Covid-19 pandemic (AFP /)

With some success in terms of prices, from a seller’s point of view: the two benchmarks for crude oil, Brent and WTI, hover around $ 75, an impressive increase of 50% since January 1, and never before. seen since October 2018.

If a consensus seemed to be emerging on this proposal, discussions are stumbling over an extension of the agreement until the end of 2022.

– Request for fairness –

The Opep + alliance was committed in April 2020, when the first wave of Covid-19 hit hard demand for black gold, to voluntarily withdraw 9.7 million barrels per day from the market and then gradually reintroduce them d ‘by the end of April 2022.

But this deadline now seems short at the current rate of reopening of the floodgates, slowed down several times because of the upheavals of the health crisis: the alliance is still leaving 5.8 million barrels underground this month.

Hence a staggering envisaged until December 2022, an option that worries Abu Dhabi.

“The Emirates are ready to extend the agreement if necessary but ask that the reference production volumes be revised (upwards) to ensure that it is fair,” said the UAE Minister of Energy on Sunday. Souheil al-Mazrouei, quoted by the WAM agency.

UAE Energy Minister Souheil al-Mazrouei at a summit in Abu Dhabi on energy sustainability on January 14, 2020 (AFP / KARIM SAHIB)

UAE Energy Minister Souheil al-Mazrouei at a summit in Abu Dhabi on energy sustainability on January 14, 2020 (AFP / KARIM SAHIB)

This threshold adopted on October 2018 corresponds for the Emirates to 3.17 million barrels per day. It does not effectively reflect the country’s full production capacity, which rose to more than 3.8 million barrels per day in April 2020, on the eve of the cartel’s drastic cuts.

– Narrow gauge –

It was this divergence that derailed the first round of cartel meetings last Thursday, then again the next day, in a group more accustomed to the spat between the two heavyweights, Russia and Saudi Arabia. .

“It’s the whole group against a single country,” responded Saudi Minister Abdelaziz bin Salman interviewed by Bloomberg TV, while calling in another interview, on the Al-Arabiya channel, for “a little rationality and a little compromise “before Monday’s meeting.

In the meantime, the market was not panicking: crude prices remained close to Friday’s closing level.

OPEC + is also faced with a complex equation, between a very real recovery in demand but which remains fragile, a probable medium-term return of Iranian exports and high prices which are causing the dissatisfaction of certain large importers such as India. .

The alliance, however, is used to the roll. At the beginning of last year, it was able to overcome a deep disagreement between Moscow and Riyadh which had led to a short but intense price war.

bp / anb / eb

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