UAE escalates Opec+ dispute as tensions on output quotas grow
The United Arab Emirates ratcheted up tension with oil allies Saudi Arabia and Russia, with officials privately floating a surprising idea: the Gulf producer is even considering leaving the Opec+ alliance.
The move is unusual because the UAE has for a long time avoided public clashes, preferring to solve disputes quietly behind closed doors. It’s unclear whether the warning is a maneuver to force a negotiation over production levels, or represents a genuine policy debate.
UAE officials have not given any indication in public that the producer is debating its membership in Opec, let alone planning to leave, and officials briefed the media under condition they would not be named, allowing room for maneuver if the state later wants to distance itself from the comments.
Tension between Riyadh and Abu Dhabi has been growing since late summer, when the UAE increased its production above its Opec+ quota, prompting a stern warning from its neighbor. Now, it appears to have escalated as Emirati policy makers grow increasingly frustrated by what they see as an unfair allocation of production targets.
It comes at a delicate moment for Opec+, which has propped up oil prices with a historic agreement to cut supply to offset the impact of the pandemic on demand. Any signs of cracks in the alliance would undermine an already fragile market.
Next meeting
The group needs to decide in the next two weeks whether to go ahead with a production increase set out in the April deal, or to delay it. So far, Riyadh and Moscow have signaled they are prepared to delay the hike as the pandemic continues to sap demand.
Earlier, Energy Intelligence reported the country was weighing up the pros and cons of Opec membership. No one was available to comment at the oil ministry.
The United Arab Emirates is taking a line unusually distant f rom that of its Gulf neighbor— and the Organization of Petroleum Exporting Countries’ de facto leader— Saudi Arabia. While Riyadh has said the group needs to be proactive and ready to act, UAE Energy Minister Suhail Al- Mazrouei has sounded more circumspect, saying everyone must first be convinced of the need to delay a production increase initially scheduled for January 2021.
Earlier this week, a panel of Opec+ ministers told the group to be vigilant about the market despite a rally in oil prices. “All participating countries need to be vigilant, proactive and be prepared to act, when necessary, to the requirements of the market,” the panel said in a statement.
Oil rose to its highest since early September on Wednesday on further signs of stronger demand in China, India and other Asian nations, and the prospect of a Covid vaccine. West Texas Intermediate settled at $ 41.82 a barrel, while Brent crude closed at $ 44.34.
Al- Mazrouei also insisted that straggling producers should implement unfinished supply cuts— possibly a barb related to the public rebuke he received from the kingdom in the summer, after the UAE flouted its own commitments. Saudi Arabia has also said that all members, collectively, need to keep to their pledges.
The lead- up to Opec meetings often features last- minute dramas, and this tussle may dissipate, as others have before. But cracks emerging in a key partnership would be an alarming development for the cartel.