Saudi Arabia and the United Arab Emirates cranked up the tension in the OPEC+ deal standoff. The diplomatic spat between long-time allies came as a surprise to the oil market leaving it guessing how much oil it will get next month. Saudi oil minister Prince Abdulaziz bin Salman insisted that the OPEC+ deal must be extended from the end of April 2022 until the end of that year.
"You have to balance addressing the current market situation with maintaining the ability to react to future developments ... if everyone wants to raise production then there has to be an extension," he said. As for the increase in oil production by 400 barrels per day on a monthly basis, this will be the best solution for all the countries participating in the deal, the minister added.
Due to catastrophically falling demand for oil after the COVID-19 outbreak, cartel members and independent oil producers had to reduce production volumes by 9.7 million barrels per day from May 2020. Shortly after, the situation stabilized and the coronavirus restrictions were adjusted. As a result, by July 2021, the output volume reached 5.76 million barrels per day. At the same time, for Russia and Saudi Arabia, this figure amounted to 11 million barrels per day.
A decision on the new parameters of the deal was expected by July 1, 2021, but the OPEC members failed to reach an agreement. The following day, July 2, the situation did not clear up. The stumbling block was a strong opposition of the UAE. The fight between the two key producers surprised market participants. Typically, they keep their grievances within the walls of the royal palaces. Riyadh insisted that the group should increase the output by 700,000 barrels per day when extending the deal until the end of 2022. The UAE authorities agree to further ease restrictions on the extraction of oil from August to December of this year. However, other representatives of the alliance are opposed to such a decision. As a result, the negotiations reached an impasse. The further fate of the OPEC+ deal will be decided after July 5, experts believe.
