Dubai – Saudi Arabia and the United Arab Emirates have reached a deal over OPEC+ policy, an OPEC+ source said on Wednesday, in a move to supply more crude to a tight oil market and to cool soaring prices.
Brent oil prices fell on the news by as much as $1 per barrel towards $75 per barrel after Reuters reported the two major OPEC producers had agreed a deal.
OPEC+ had agreed record output cuts of almost 10 million barrels per day (bpd) last year to cope with a pandemic-induced slump in demand. The curbs have been gradually relaxed since then and now stand at about 5.8 million bpd.
The discussion between Riyadh and Abu Dhabi came in public after the OPEC+ talks, with both airing concerns about details of a proposed deal that would have added an extra 2 million bpd to the market to ease oil prices that have recently climbed to 2-1/2 year highs.
While Saudi Arabia and the UAE both endorsed raising output immediately, the UAE had opposed extending the existing deal until December 2022 from April 2022 unless it was granted a higher production quota.
The OPEC+ source said Riyadh had agreed to Abu Dhabi’s request to have UAE’s baseline – the level from which cuts under the OPEC+ agreement on supply curbs are calculated – set at 3.65 million bpd from April 2022, up from 3.168 million now.
Giving the UAE a higher production baseline paves the way for extending the overall pact to the end of 2022, the OPEC+ source said.
OPEC+ has yet to take a final decision about the production deal. It was not immediately clear if other countries would also adjust their baselines.
The producers have said they will decide on a new date for the next meeting in due course.
Based on Reuters Report.