July 09, 2021
OPEC Standoff: Resetting market share
The 1 July OPEC meeting ended in deadlock. Although all the major oil producers agreed in principle to collectively boost production by 400,000 barrels per month from August through the end of 2021, they failed to agree on how long the production agreement should last, putting the whole deal on hold. This deadlock represents the latest divide over market share, this time, about how to distribute reopening gains.
The holdout, surprising to some, was the United Arab Emirates, a country has typically over complied (cutting more than mandated), along with its larger neighbour, Saudi Arabia and which has long maintained spare capacity. While the UAE has long had one of the lower fiscal break-even points (the oil price needed to sustain its spending), it has rarely been a holdout.
Producers such as the UAE want to make money from their assets today and set up robust future asset streams that will be robust to the shift to net zero production.
What’s changed is that the UAE (or rather Abu Dhabi, the oil-rich largest emirate) has been investing heavily to boost boosting its production capacity and leveraging its infrastructure. Both measures increase its desire to reset its future production within the group, while it can. This divide within OPEC also comes as the Saudi-Emirati relationship faces several areas of increased competition as both countries face greater urgency to diversify their economies.
The standoff spoiled the recent Saudi narrative of “predictability” in which gradual production increases would maintain the market share of OPEC (and the broader OPEC+ grouping, which also includes, Russia, Kazakhstan and Mexico), helping meet global demand which is increasing despite the latest deadly Covid waves.
Read the full article from The Interpreter.
More from CNAS
-
BONUS: Comparing China Sanctions Under Trump and Biden
Join Emily Kilcrease and researcher Eleanor Hume to discuss the latest edition of CNAS's Sanctions by the Numbers series, examining how the U.S.'s sanctions policy on China ha...
By Emily Kilcrease & Eleanor Hume
-
Sanctions by the Numbers: Comparing the Trump and Biden Administrations’ Sanctions and Export Controls on China
Executive Summary The Biden administration has exceeded the Trump administration in the number of financial sanctions and entity-based export controls placed on Chinese person...
By Eleanor Hume & Rowan Scarpino
-
A Fight Among China Hawks Could Imperil U.S. AI Dominance
Rolling the dice now on partnerships like the G42 deal could be critical to ensuring U.S. dominance....
By Daniel Silverberg & Elena McGovern
-
U.S. Chip Controls and the Future of AI Compute
That escalated quickly! Emily and Geoff discuss why the U.S. aim to deny China access to the computing power necessary for frontier AI capabilities has led to an ever expandin...
By Emily Kilcrease, Geoffrey Gertz & Pablo Chavez