OPEC + meeting postponed as division over oil production cuts deepens

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The Opec + group delayed talks for two days after a deepening split over whether to ease production cuts next month derailed hopes for a quick deal and exposed tensions between main producers.

Oil ministers, who began a two-day virtual meeting on Monday, postponed the second stage of talks after Opec members failed to agree to an extension of the existing reduction agreement between them, before a scheduled meeting with Russia and other allies outside the cartel. One day later.

The group will meet again on Thursday to give more time for discussions, according to people briefed on the delay.

Key members of the alliance, led by Saudi Arabia, have called for caution in releasing more barrels into the market as the pandemic continues to rage. But the United Arab Emirates, the kingdom’s long-time ally in the Gulf, have yet to sign any extensions.

The UAE, which has come under fire this year for producing more than its allotted quotas, has since cut additional barrels to offset the additional production. The country is now demanding that other overproducers do the same before agreeing to an extension, a person briefed on the matter said. Nigeria, Iraq, Russia and Kazakhstan are among the other countries that have pumped more than they should this year.

“Pressure from the UAE to make an extension conditional on further catch-up commitments is viewed by Saudi Arabia as unreasonable, especially as the group’s overall compliance remains very strong,” said Amrita Sen of consultancy Energy Aspects. .

Producers were buoyed by a rise in oil prices that pushed up Brent, the international benchmark, by more than a quarter last month to nearly $ 50 a barrel.

The positive news about vaccine developments has raised hopes among oil producers that demand will eventually return to normal in 2021. But further lockdowns in Europe and the rising number of cases in the United States are still a problem. threat in the coming months for some delegates.

“These 2020 market conditions are expected to continue in the first quarter of 2021 and so we must be careful,” Algerian Energy Minister Abdelmadjid Attar told reporters ahead of Monday’s private ministerial talks. “The road to recovery is long and bumpy.”

Opec has been working with Russia and other oil-producing countries outside the cartel since 2016 to stabilize crude prices and balance supply and demand in times of crisis.

The 23-member Opec + group, which together produces more than half of the world’s crude oil, agreed in April to record a record cut of more than 10% of global production – just under 10 million barrels per day – with the intention of returning the barrels to the country. market gradually as the world economy improved.

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Producers relaxed cuts to 7.7 million barrels per day, but the expected return of an additional 2 million barrels per day in January was seen as a step too far for some producers, with global oil stocks swelling and prices ranging between 40 and 45 dollars. barrel. That compares to $ 60 to $ 70 a barrel before the pandemic.

Saudi Arabia, the de facto leader of Opec, has pushed to extend the 7.7 million barrels per day cuts for at least three months.

Producers are still expected to come to an agreement. Yet without a deal, traders brace for the possibility of additional barrels being released into an already well-supplied market. The delay risks disrupting oil markets with still fresh memories of the oil price war between Saudi Arabia and Russia in March, which led to a flood of supplies the last time they failed. managed to strike a deal.

Iranian Oil Minister Bijan Namdar Zanganeh warned ahead of Monday’s meeting that he did not expect talks to go smoothly, indicating a possible split between some of the group’s largest producers.

“Some are against the extension of the previous decision [on production cuts] and that makes the job difficult, ”Zanganeh told a reporter in Tehran, adding that these countries included the UAE, Russia and Kazakhstan.

Algerian Attar later told the official press, even as ministerial negotiations continued, that he saw consensus for an agreement among OPEC members to extend the deal for three months.

But people close to the group’s thinking said there were still a number of outstanding issues to be addressed, including winning the full support of countries such as Russia and the United Arab Emirates.

The Kremlin said on Monday that the differences were not at the same level as earlier this year before a reduction deal was finally reached.

Additional reporting by Najmeh Bozorgmehr

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