<article><p class="lead">The Opec+ coalition agreed today a deal to boost its collective output by up to 400,000 b/d each month through to the end of next year, after reaching a compromise to adjust five of its members' baseline production levels upward.</p><p>Originally set to expire in April 2022, the Opec+ group's decision to extend the deal allows for more time to unwind the 5.8mn b/d that is still being withheld to be unwound in a more gradual manner. This stepwise increase would theoretically increase the alliance's collective output ceiling by 2mn b/d by the end of the year, and pave the way for the remaining 3.8mn b/d to return by September. </p><p>The extension to December, however, would allow Opec+ the option to pause the output hikes for up to three months in response to any abrupt changes in market dynamics — such as a return of Iranian volumes in the event of a lifting of sanctions on Tehran, or the possible emergence of new strains of Covid-19. </p><p>The agreement was brokered in a virtual ministerial meeting today, ending a two-week output policy impasse centred on a demand by the UAE for its baseline to be revised. The UAE, now Opec's third largest producer behind Saudi Arabia and Iraq, complained at the previous Opec+ meeting in early July that its original baseline was "outdated" and said it would object to an extension beyond April 2022 unless Opec+ agreed to revisit its baseline, and in turn, how its production quota is calculated.</p><p>As a compromise, the group agreed to adjustments in baselines from 1 May 2022, not just for the UAE but also for four other members: Saudi Arabia, Russia, Iraq and Kuwait. The changes will lift the combined baseline levels of production of the five countries by a combined 1.633mn b/d from May next year, with Russia and Saudi Arabia accounting for almost two thirds of the increase.</p><p>The UAE will now see its baseline reference rise to 3.5mn b/d from May 2022, up 332,000 b/d from the original 3.168mn b/d level it accepted when the deal was first struck in April 2020, but still well below the near 4mn b/d it says is its current capacity. <i>Argus</i> assesses the UAE's production capacity at around 3.85mn b/d. </p><p>The baselines for Saudi Arabia and Russia will both rise by 500,000 b/d to 11.5mn b/d from 11mn b/d previously — even as the latest IEA report flagged that Russia had "never pumped anywhere close" to its original 11mn b/d baseline. Opec producers Kuwait and Iraq will see their baselines rise by 150,000 b/d from 2.809mn b/d to 2.959mn b/d, and by 151,000 b/d from 4.652mn b/d to 4.803mn b/d, respectively.</p><p>Two other countries — Nigeria and Algeria — both made cases at today's meeting for baseline adjustments, according to Saudi oil minister Prince Abdulaziz bin Salman and two other Opec+ delegates, but decisions on the two requests have yet to be taken. Algeria's current baseline stands at 1.057mn b/d, while Nigeria is 1.829mn b/d. </p><p>"When we decide, we decide as a whole group," said energy UAE minister Suhail al-Mazrouei today. He added that the UAE had always been a committed member of Opec+, and praised the country's relationship with its de-facto Saudi Arabia. Bilateral talks with the kingdom were "always an enabler for us to reach understanding quicker," he said.</p><p>The Opec+ coalition's compliance with its June obligations slipped to a five-month low of 112pc in June, down from 114pc of May, according to an internal document seen by <i>Argus</i>. Opec conformity eased from 124pc in May to 120pc last month, while their non-Opec counterparts increased compliance from 93pc in May to 97pc in June. Opec+ conformity figures are an average of the production estimates of six secondary sources, including <i>Argus</i>. An <a href="https://direct.argusmedia.com/newsandanalysis/article/2232821">Argus survey</a> pegged Opec+ compliance at 111pc last month, with Opec country conformity at 120pc, and non-Opec participants at 96pc.</p><h3>Here to stay</h3><p>The Saudi oil minister also endorsed the staying power of the Opec+ coalition, reiterating it is "here to stay," and said the group's monthly ministerial meetings will be an ongoing feature. He reassured that Opec+ would "continue attending to the market", if required. </p><p>"We hope to continue this process of balancing the market, not only for the first half of this year, but for the entire period of the next year too, because a unlike some of our colleagues and friends in banks and consultancies who try not to look beyond the tip of their noses, we look at these things for a least a year, a year-and-a-half, just to ensure that we get the balances right", Prince Abdulaziz said.</p><p>The group's ministers are scheduled to next meet on 1 September.</p><p class="bylines">By Ruxandra Iordache, Nader Itayim, Samira Kawar and Adal Mirza </p></article>
