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OPEC has suffered immensely from the pandemic and the resulting loss of oil demand, and its work may now become significantly more challenging as members mull over the pros of staying with the group against the scammer of performing the duty and painful task. to curb production. And the UAE is rumored to be doing just that. Meanwhile, oil prices have failed to rebound to the level that most OPEC members need them, intensifying the situation most OPEC members find themselves in.
Most OPEC members have budgets that depend heavily on oil income – oil income that has been reduced by falling oil prices, and then again by demanded production cuts in an attempt to rebalance the excess market and keep prices at acceptable levels And although OPEC would mostly deny that the latter is their goal, there is little distinction there.
Rumors surfaced on Friday that the UAE was contemplating the pros and cons of joining OPEC.
While it hasn’t officially announced a decision, or even officially announced it was considering withdrawing from the group, the UAE is said to be internally discussing its cooperation with OPEC, according to Energy Intel.
The first sign that supports the idea that the UAE may be dissatisfied with their membership came on Tuesday when the UAE suggested to the group that all members should first respect their existing production quotas before even considering a ‘ extension of such cuts, second Intel Energy.
But there is more. UAE officials, who spoke privately, are also asking whether their OPEC membership is in the country’s long-term interest given the harsh prospects for oil demand and their need to monetize resources. to avoid frozen assets, Energy Intel said.
Related: Why Iraq Still Doesn’t Produce 10 Million Barrels a Day
Some in the UAE also believe, like Russia, that OPEC’s production cuts raise oil prices enough to encourage US shale, a fierce and resilient competitor. This idea was also behind the failure of the latest OPEC deal in March, when Russia and Saudi Arabia flooded the oil market after Russia refused to accept further cuts.
Of course, these private considerations could simply indicate that the UAE is trying to get a better deal from OPEC regarding production cuts.
But the alliance is clearly fragile and the proof is the failure of the agreement earlier this year. Should the UAE break ranks, others will surely follow.
For now, OPEC is mostly held together by the work of Russia and Saudi Arabia. But this too is a thing of the past. Saudi Arabia now has grievances with non-compliant members after carrying their water for more than a year by cutting more production to keep group compliance near acceptable levels.
Saudi Arabia has indicated that it will no longer perform this task for the group and has taken a more resolute stance that holds each OPEC member to their production cuts and promises not to curb their production further to compensate for those (Iraq) who they fail to meet their production cut demands.
These developments raise troubling questions about the fragility of the OPEC + alliance. The technical meeting ended without agreeing on a course to recommend for the full meeting on November 30 and December 1. This is the first sign that the next meeting, in charge of setting production targets for 2021, will be difficult.
And if March is any indication, the failure of the deal could mean the world will be flooded with oil again, with every OPEC + member trying to regain any market share lost during the rigorous production cut deal.
By Julianne Geiger for Oil “
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