Saudi oil minister highlights need to extend Opec+ deal
Saudi oil minister Prince Abdulaziz bin Salman insisted last night that Opec+ must extend its output deal from the end of April 2022 until the end of that year, despite strong UAE opposition to an extension that does not also entail revising the production baselines of participating members.
The Saudi minister's insistence on the need to extend the deal while dismissing the UAE demand as a separate issue to be dealt with through Opec procedure rather than a negotiating point tied to the proposed extension means Opec+ faces a likely impasse when it resumes talks today.
"If everyone wants to increase production, then the agreement must be extended," said the Saudi oil minister in an interview with Saudi Arabia's semi-official Alarabiya TV.
Even if Opec+ increases output by 400,000 b/d from August until the agreement runs out in April 2022, the alliance would still be left with "at least" 2.8mn b/d of cuts still in force by then, necessitating an extension, said Prince Abdulaziz.
He was speaking on the eve of a resumption of a meeting by Opec+ ministers that was adjourned on 2 July after failing to agree on setting production levels beyond July, despite acknowledgement within the alliance of the need to cool the market amid rising prices and strengthening demand.
The coalition has largely coalesced around a proposal that would see it raise production quotas by 2mn b/d by the end of the year, while also extending the two-year agreement beyond its current April 2022 expiry through to the end of that year. But the UAE refuses to agree to the proposal unless members' output baselines, which for the majority of members are pegged to their October 2018 output levels, are revised.
Asked about the UAE's contention that its output baseline is unfair, the Saudi minister said procedures exist for dealing with such grievances and they should be followed, adding, "if such reservations existed, why were they not voiced when we concluded the December 2019 agreement?"
Referring to the way in which baselines are decided, the Saudi oil minister said, "There is an existing mechanism, which follows a methodology and entails a process and technical aspects."
And he rejected the widely reported UAE position that output baselines — used as a reference for calculating output quotas — should be revised to April 2020 levels when no production restraints applied for one month.
The Saudi minister said that in 34 years of attending Opec meetings, he had never known of a country demanding that its capacity should be determined on the basis of only one month of higher output.
Asked if he was optimistic about the prospects of an agreement at today's Opec+ meeting, he said, "I am neither optimistic, nor pessimistic. I am a person who believes in the power of God Almighty."
But Prince Abdulaziz also held out hope that a compromise could be reached. "A great deal of effort was made over the previous 14 months, and tremendous achievements have been made, and it would be a shame for us not to preserve that when a measure of reason and concession would be our real salvation," he added.
UAE minister of energy Suhail al-Mazrouei said earlier yesterday that his country supports the proposal for Opec+ to boost output from August, but will continue to oppose plans to extend the current agreement till the end of 2022 if it remains tied to "outdated" production quotas.
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