OPEC+ Diplomatic Spat leaves oil market shaky, meets Monday
Saudi Arabia and the United Arab Emirates cranked up the tension in their OPEC standoff as the rare diplomatic spat between long-time allies leaves the global economy guessing how much oil it will get next month.
The bitter clash has forced OPEC+ to halt talks twice already, with the next meeting scheduled for Monday, putting markets in limbo as oil continues its inflationary surge above $75 a barrel. With the cartel discussing its production policy not only for the rest of the year, but also into 2022, the solution to the standoff will shape the market and industry into next year.
The fight between the two key producers broke into public view on Sunday with both countries, which typically keep their grievances within the walls of the royal palaces, airing their differences on television.
Riyadh insisted on its plan, backed by other OPEC+ members including Russia, that the group should increase production over the next few months, but also extend its broader agreement until the end of 2022 for the sake of stability.
“We have to extend,” Saudi Energy Minister Prince Abdulaziz bin Salman said in an interview with Bloomberg Television on Sunday night. “The extension puts lots people in their comfort zone.”
In an indication of the seriousness of the diplomatic dispute, Prince Abdulaziz signaled that Abu Dhabi was isolated within the OPEC+ alliance. “It’s the whole group versus one country, which is sad to me but this is the reality.”
Hours earlier, his Emirati counterpart, Suhail al-Mazrouei again rejected an extension of the deal, supporting only a short-term increase and demanding better terms for itself for 2022.
“The UAE is for an unconditional increase of production, which the market requires,” Al-Mazrouei told Bloomberg Television earlier on Sunday. Yet the decision to extend the deal until the end of 2022 is “unnecessary to take now.”
Abu Dhabi is forcing its allies into a difficult position: accept its requests, or risk unraveling the OPEC+ alliance. Failure to reach a deal would squeeze an already tight market, potentially sending crude prices sharply higher.
But a more dramatic scenario is also in play — OPEC+ unity may break down entirely, risking a free-for-all that would crash prices in a repeat of the crisis last year. That time, it was a disagreement between Saudi Arabia and Russia that triggered a punishing price war.
Months after that price war ended in a truce, the UAE unsettled the market again by floating the idea of leaving the cartel. It hasn’t repeated the threat again this week, but when asked if the UAE might quit, the Saudi prince only said: “I hope not.”
Bloomberg/Hauwa Abu
