MOSCOW, July 2. /TASS/. The majority of members of the OPEC+ monitoring committee do not oppose the United Arab Emirates’ position to change its base production level, from which crude output reduction quotas are calculated. The extension of the easing of the OPEC+ deal means another agreement, and consequently, any member has the right for a revision as well, a high-ranking source in OPEC told TASS.
OPEC+ nations could not concur on an extension of easing oil production cuts at their July 1st meeting because not all members agreed with the proposed quotas. Several countries, including the UAE, suggested that the base production level, from which the cuts are calculated, should be revised.
In particular, the UAE, for which this level currently stands at 3.168 mln barrels per day, insisted on raising it to 3.8 mln barrels per day. In this case, it could increase production by another 0.6 mln barrels per day by the end of 2021, sources in OPEC told TASS.
"As a matter of fact, most members of the committee support the UAE’s position. The extension of easing [the cuts] translates to a conclusion of a new agreement, which means everyone has the right to a revision of the quotas," the source told TASS.
He also confirmed that the United Arab Emirates did not oppose the extension of the deal, rather it only asked to revise its base level. The source also noted that there had been cases when the base production level of certain countries, such as Azerbaijan, Kuwait, Kazakhstan, Nigeria, was revised, which did not affect the operation of the agreement.
The OPEC+ talks will continue on Friday, July 2. The meeting of the OPEC+ monitoring committee is scheduled for 4:00 pm Moscow time, while the OPEC+ ministerial meeting is set for 5:30 pm Moscow time.
The United Arab Emirates is pouring investment into the growth of production capacities and plans to expand them from 4 mln to 5 mln barrels per day by 2030, Fitch’s Dmitry Marinchenko explained.
"Everyone understands now that production should be increased to avoid an excessive deficit and any unhealthy price hikes," he said. On the other hand, it is dangerous to let go of the situation now since demand has not recovered yet and the risk of more lockdowns due to the mutation of the virus persists, the expert added. He hopes that OPEC+ members will be able to reach a compromise at Friday’s meeting.
This is not the first time that the participants of the oil output reduction pact have differing viewpoints on production volumes. In particular, when Russia and Kazakhstan insisted on output recovery in the spring, Saudi Arabia objected. A compromise was eventually reached as Russia and Kazakhstan were allowed to increase production, while Saudi Arabia assumed the burden of additional reduction. Additionally, the remaining OPEC+ members were to maintain the current production volume.