The United Arab Emirates ratcheted up tension with oil allies in OPEC+, with officials privately questioning the benefits of being in the producers’ alliance and even considering whether to leave it. The UAE has not said publicly it’s debating its membership, let alone planning to exit. And officials briefed the media under condition they would not be named, allowing room for maneuver if they later want to distance themselves from the comments.
It comes at a delicate moment for OPEC+, which propped up oil prices with an historic agreement to cut supply and offset the impact of the pandemic on demand. Any signs of cracks in the alliance — let alone dissent from a producer as big as the UAE — would undermine an already fragile market.
Brent crude fell 0.1% to $44.28 a barrel as of 8:35 a.m. in London. The benchmark has more than doubled since OPEC+ struck its deal in April, but is still down 33% this year.
The group needs to decide in the next two weeks whether to go ahead with a January production increase as set out in the agreement, or delay it. So far, Riyadh and Moscow have signaled they are prepared to delay the hike as the virus continues to sap demand for energy.
This week, a panel of OPEC+ ministers told the group — an alliance between the Organization of Petroleum Exporting Countries and others such as Russia — to be vigilant about the market despite a rally in oil prices. “All participating countries need to be vigilant, proactive and be prepared to act, when necessary, to the requirements of the market,” the panel said in a statement.
UAE Energy Minister Suhail Al-Mazrouei sounded more circumspect and took a line unusually distant from that of Saudi Arabia. He said everyone must first be convinced of the need to delay the production increase.
Oil rose to its highest since early September on Wednesday on further signs of stronger demand in China, India and other Asian nations, and with pharmaceutical companies making progress on Covid-19 vaccines.
Al-Mazrouei also insisted that straggling producers should implement unfinished supply cuts — possibly a barb related to the public rebuke he received from the kingdom in the summer, after the UAE flouted its own commitments. Saudi Arabia has also said that all members, collectively, need to keep to their pledges.
The UAE’s daily crude output is capped at 2.59 million barrels until the end of the year, after which it’ll rise to 2.74 million if OPEC+ opts against a delay. The country pumped 3.4 million barrels daily in March, a monthly record, and has the capacity to produce around 4 million each day.
The lead-up to OPEC meetings often features last-minute dramas, and this tussle may dissipate, as others have before. But cracks emerging in a key partnership would be an alarming development for the cartel.