OPEC Secretary General Haitham Al Ghais in a letter dated Dec. 6 and seen by Reuters urged OPEC members to reject any COP28 deal which targets fossil fuels rather than emissions.

Ministers from Iraq, Kuwait, Algeria and Oman arrived for the energy meeting, as well as Saudi Energy Minister Prince Abdulaziz bin Salman who had been in Dubai for the U.N climate summit.

United Arab Emirates Energy Minister Suhail Mohamed Al Mazrouei was absent.

Saudi Arabia, the de-facto leader of OPEC, and top ally Russia are among several countries insisting that the COP28 conference in Dubai focus only on reducing climate pollution – and not on targeting the fossil fuels causing it, according to observers in the negotiations.

Yet at least 80 countries including the United States, the European Union and many poor, climate-vulnerable nations are demanding that a COP28 deal call clearly for an eventual end to fossil fuel use.

When asked about Kuwait’s position on the climate talks, Oil Minister Saad Al Barrak told reporters it was not established yet.

Deals at U.N. climate summits must be passed by consensus among the nearly 200 countries present. The summits aim to establish a consensus on the world’s next steps to address climate change – though it is up to individual countries to ensure it happens through their national policies and investments.

For oil-rich countries, a deal to ditch fossil fuels – even without a firm end date – would signal a political willingness from other nations to slash their use.

COP28 is scheduled to end on 12 December, as is the two-day 12th Arab Energy Conference.

Negotiators and observers at the annual U.N. climate talks, pursuing a deal to tackle the worst impacts of climate change, said several OPEC members appeared to have heeded calls by the oil producer group to veto any deal to phase out fossil fuels.

In a letter dated Wednesday, OPEC Secretary General Haitham Al Ghais called on members to reject language targeting fossil fuels, saying “the undue and disproportionate pressure against fossil fuels may reach a tipping point with irreversible consequences”.

Al Ghais declined to comment on the letter but said OPEC wanted to keep the focus of the talks on reducing emissions, as opposed to picking energy sources.

“The world requires major investments in all energies, including hydrocarbons,” he said. “Energy transitions must be just, fair and inclusive.”

At least 80 countries are demanding a COP28 deal that calls for an eventual end to fossil fuel use, the top source of planet-warming emissions, to try to get on track to reach the goal of limiting global warming to 1.5 degrees Celsius.

But they face a struggle to persuade countries that rely on oil and gas for revenue, many of which are instead promoting technologies like carbon capture, which is expensive and has yet to be proven at scale.

Tina Stege, climate envoy of the Republic of the Marshall Islands – one of the places worst affected by climate change, said any pushback on including a phase-out of fossil fuels risked the world’s prosperity.

“Nothing puts the prosperity and future of all people on earth, including all of the citizens of OPEC countries, at greater risk than fossil fuels,” said Stege, whose country chairs the High Ambition Coalition, a group of nations pushing for more ambitious emissions targets and policies.

“This is why the High Ambition Coalition is pushing for a phase out of fossil fuels, which are at the root of this crisis. 1.5 is not negotiable, and that means an end to fossil fuels,” she said in a statement.

Critical Stage’

After a week of technical talks, the negotiations now have ministerial input before the scheduled end of the summit on Tuesday – the last phase when countries wrestle to find consensus over the wording regarding fossil fuels.

The latest version of the negotiating text includes a range of options – from agreeing to a “phase out of fossil fuels in line with best available science”, to phasing out “unabated fossil fuels”, to including no language on them at all.

Germany’s state secretary and special envoy for climate action, Jennifer Morgan, said counties were now “moving into the critical stage of negotiations”.

“It is time for all countries to remember what is at stake and to be ready to send the signal the world needs at this critical moment of the global climate crisis. I am concerned that not all are constructively engaging.”

Asked about the OPEC letter, COP28 Director General Majid Al Suwaidi avoided the term “fossil fuels” but said the United Arab Emirates, as president of the summit, wanted a deal to get the world on track for 1.5 degrees.

“Our COP president has been very clear from day one that he wants to achieve an outcome that puts us clearly on track for 1.5 degrees,” he told a news conference. “He clearly wants to see an outcome that is as ambitious as possible and we believe we are going to deliver it.”

Negotiators have a tough job ahead.

Wael Aboulmagd, special representative to the COP27 Egyptian presidency, said there were too many options in the text on fossil fuels, adding there was also deadlock in talks on measures to help nations adapt to extreme weather and other climate change impacts.

“We still have some serious issues with adaptation. We are still way behind on that.”

India, the world’s third largest oil importer and consumer, has emerged as the top buyer of the discounted Russian seaborne oil after Western nations stopped buying from Moscow following its invasion of Ukraine.

Middle Eastern supplies are also likely to tighten further following Saudi Arabia’s decision to extend its voluntary output cuts through the end of this year, prompting India to consider other options.

India imported on average 1.76 million barrels per day (bpd) of Russian oil from April to September, or the first half of fiscal 2023/2024, more than double the about 780,000 bpd in the same year-ago period, tanker data from industry sources showed.

Last month, India’s imports from Russia, which had slipped in July and August, recovered to 1.54 million bpd, up 11.8% from August and 71.7% from a year ago, the data showed.

Russia was the top oil supplier to India in April to September, followed by Iraq and Saudi Arabia.

India’s imports from Iraq and Saudi Arabia fell by 12% and about 23% to 928,000 bpd and 607,500 bpd, respectively, during the April-September period, the data showed.

Imports from the Middle East in April-September declined by about 28% to 1.97 million bpd, dragging down the region’s share in India’s overall oil imports to 44% from 60% during the same year-ago period.

The share of oil from the Commonwealth of Independent States (CIS), which include Azerbaijan, Kazakhstan and Russia, nearly doubled to 43% mainly due to higher purchases from Moscow, the data shows.

Lower purchases from the Middle East dragged down the share of OPEC in India’s overall imports to the lowest in 22 years.

The share of members of the Organization of the Petroleum Exporting Countries (OPEC), mainly from the Middle East and Africa, fell to 46% in April to September compared with about 63% a year ago, a Reuters analysis of the data that dates back to 2001/02 showed.

Iranian Foreign Minister Hossein Amirabdollahian on Wednesday called on OIC members to impose an oil embargo and other sanctions on Israel and expel all Israeli ambassadors.

Four sources from the Organization of the Petroleum Exporting Countries (OPEC), which produces a third of the world’s oil and includes several Muslim countries including Iran, said that no immediate action or emergency meetings were planned by the group in light of Iran’s comments.

“We are not a political organisation,” one of the sources said.

On Tuesday, the Gulf Cooperation Council secretary-general when asked whether Arab countries should reduce oil production in retaliation for Israel’s actions in Gaza, said that the GCC was committed to energy security and shouldn’t use oil as a weapon.

“The GCC works as a clear and honest partner as an oil exporter with the international community and we can’t use that as a weapon in any way possible,” Jasem al-Budaiwi said.

In 1973, Arab producers led by Saudi Arabia slapped an oil embargo on Western supporters of Israel in its war with Egypt, targeting Canada, Japan, the Netherlands, Britain and the United States.

Oil prices spiked as a result but over the longer term the crisis led to the development of new oil provinces outside the Middle East like the North Sea and deepwater assets, and encouraged alternative energy.

While Western countries were the main buyers of crude produced by the Arab countries at the time, nowadays Asia is the main buyer of OPEC’s crude.

“The geopolitical environment is different compared to 50 years ago,” another OPEC source said about why an embargo won’t be implemented.

An urgent meeting of the OIC is taking place in the Saudi city of Jeddah to discuss the Israeli-Palestinian conflict, after a blast at a Gaza hospital late on Tuesday killed large numbers of Palestinians.

Amirabdollahian also called for the formation of a team of Islamic lawyers to document potential war crimes committed by Israel in Gaza.

Iran has no diplomatic relations with Israel.

Prior to the hospital blast on Tuesday, health authorities in Gaza said at least 3,000 people had died during Israel’s 11-day bombardment that began after a Hamas Oct. 7 rampage on southern Israeli communities in which 1,300 people were killed and around 200 were taken into Gaza as hostages.

The view from the Organization of the Petroleum Exporting Countries, in its 2023 World Oil Outlook released on Monday, contrasts with that of other forecasters, including the International Energy Agency (IEA), that say demand might peak this decade.

Another decade or more of rising consumption would be a boost for OPEC, whose 13 members depend on oil income. The group says oil should be part of the energy transition, and it cited decisions by some governments and companies to slow their retreat from fossil fuels.

“Recent developments have led the OPEC team to reassess just what each energy can deliver, with a focus on pragmatic and realistic options and solutions,” OPEC Secretary General Haitham Al Ghais wrote in the foreword to the report.

“Calls to stop investments in new oil projects are misguided and could lead to energy and economic chaos,” he added, putting the required oil sector investment at $14 trillion out to 2045, up from $12.1 trillion estimated last year.

OPEC expects world oil demand to reach 116 million barrels a day (bpd) by 2045, around 6 million bpd higher than expected in last year’s report, with growth led by China, India, other Asian nations, and Africa and the Middle East.

IEA Executive Director Fatih Birol said last week global coal, oil and natural gas consumption may peak before 2030. The IEA advises industrialised countries and in 2021 said investors should halt new oil investments if the world wants to reach net zero emissions by mid-century.

Net Zero Pushback

Speaking at the publication’s launch in Riyadh, the capital of top OPEC producer Saudi Arabia, OPEC’s Al Ghais cited pushback against net zero policies, and said climate action should not come at the cost of global energy security.

“Over the past year what is clear is that we have seen populations voice concerns about the costs and actual benefits of net zero targets,” he said.

“There are some who unfortunately continue to push the extremely risky narrative of dismissing oil with talk of oil demand dropping by almost 25 million barrels a day by the year 2030,” he added.

In the report, OPEC also raised its demand forecasts for the medium term to 2028, citing robust demand this year despite economic headwinds such as interest rate hikes.

World demand in 2028 will reach 110.2 million bpd, OPEC said, up from 102 million bpd in 2023. It predicted oil use in 2027 would reach 109 million bpd, up from 106.9 million bpd estimated in 2022.

In 2020, OPEC made a shift when the pandemic hit oil demand, saying consumption would eventually slow after years of predicting ever-increasing use. After that it started raising forecasts again as oil use recovered.

While the 2022 version of OPEC’s report anticipated global demand reaching a plateau after 2035, the latest sees oil use rising by another 1.6 million bpd in the last 10 years of the forecast period. OPEC now expects demand to be higher than it thought in 2019, before the pandemic.

By 2045, there will be 2.6 billion vehicles on the world’s roads, a billion more than in 2022, OPEC forecast. Over 72% of them will be powered by a combustion engine despite electric vehicles being the fastest-growing segment, the report said.

OPEC and its allies, known as OPEC+, are again cutting supply to support crude prices. The report sees OPEC’s total share of the oil market rising to 40% in 2045 from 34% in 2022 as non-OPEC output starts declining from the early 2030s.

The upbeat view from the Organization of the Petroleum Exporting Countries (OPEC) comes as global oil prices have reached their highest since January. Tight supply has given impetus to the rally and OPEC’s monthly report also showed Saudi Arabia delivered on a voluntary output cut in July.

OPEC said it expects world oil demand to rise by 2.25 million barrels per day (bpd) in 2024, compared with growth of 2.44 million bpd in 2023. Both forecasts were unchanged from last month.

“Prospects for healthy oil fundamentals in the second half of the year, along with the pre-emptive, proactive and precautious approach of OPEC and non-OPEC producing countries to assess market conditions and take necessary measures at any time and as needed, will ensure stability of the global oil market,” OPEC said in its report.

In 2024 “solid” economic growth amid continued improvements in China is expected to boost the oil consumption, it added.

OPEC and its allies, together known as OPEC+, began limiting supplies in late 2022 to bolster the market and in June extended supply curbs into 2024. Tighter supply has underpinned a rally in oil prices, with Brent crude trading above $88 a barrel on Thursday, its highest since January.

The report nudged up OPEC’s forecast for world economic growth this year to 2.7% from 2.6% and raised next year’s figure by the same increment to 2.6%, saying growth in the United States, Brazil and Russia had surpassed initial expectations in the first half of 2023.

“Despite the latest positive developments, several uncertainties regarding economic growth in the second half of 2023 and 2024 require cautious monitoring,” OPEC said, adding that these include continued high inflation and the prospect of further increases to interest rates.

Saudi Delivers Voluntary Cut

The report also showed that OPEC’s oil production fell sharply in July, driven by Saudi Arabia’s pledge to cut its output by 1 million bpd, a measure it has since extended to include September.

OPEC output fell by 836,000 bpd to 27.31 million bpd in July, OPEC said, citing figures it collects from secondary sources including analysts and oil industry media, driven by lower Saudi output.

Saudi Arabia told OPEC that it cut output by 943,000 bpd in July to 9.013 million bpd, delivering on its promise to lower July production by 1 million bpd. The pledge was first made at the June OPEC+ meeting and has been extended twice to include August and September.

The Organization of the Petroleum Exporting Countries has pumped 27.34 million barrels per day (bpd) this month, the survey found, down 840,000 bpd from June. That’s the lowest since September 2021 according to Reuters surveys.

Saudi Arabia pledged to cut output by 1 million bpd in July as part of OPEC+’s deal in June which limits supply into 2024. Oil has begun to rally in response, with Brent crude trading above $85 a barrel, up from near $71 in late June.

The Saudi move, which Energy Minister Prince Abdulaziz bin Salman called a “Saudi lollipop,” came on to top of earlier voluntary cuts that Riyadh and several other members of OPEC+ had announced, and added to reductions made under a late 2022 OPEC+ agreement.

Increases in Angola and Iraq due to higher exports limited the decline in OPEC output in July, the survey found.

OPEC’s output is still undershooting the targeted amount by almost 1 million bpd partly because Nigeria and Angola lack the capacity to pump as much as their agreed level.

Saudi Arabia lowered output by 860,000 bpd month-on-month, the survey found. Figures from Kpler show crude exports down over 600,000 bpd month-on-month, although another tanker tracker found a smaller export decline.

The second-biggest decline was in Nigeria where Shell suspended loadings of Forcados crude due to a potential leak at the export terminal. Libyan output edged lower due to a brief stoppage at some fields due to a protest.

The Reuters survey aims to track supply to the market. It is based on shipping data provided by external sources, Refinitiv Eikon flows data, information from companies that track flows such as Petro-Logistics and Kpler, and information provided by sources at oil companies, OPEC and consultants.

Both parties also discussed developments in Ukraine.

“There was some expectation of a phone call, but it didn’t happen,” a U.S. official told WSJ. “It was part of turning on the spigot [of Saudi oil]”.

It further stated that, Riyadh has signaled that its relationship with Washington has deteriorated due to Biden administration’s wrong policies towards the Gulf region. 

UAE also stands by the Saudi concerns about the restrained U.S. response to the recent missile strikes by Iran-backed Houthi terrorists in Yemen against the interests of UAE and Saudi Arabia.

Moreover, both the monarchies are concerned about the revival of the Iran nuclear deal, which doesn’t address their security concerns, and has entered into the final states of negotiations in the recent weeks.

However, Biden is running after the two gulf allies to repair the relations as the oil prices surge over $130 per barrel, which is for the first time in the 14 years. Saudi Arabia and UAE are the two key oil producers in the region that can pump millions of more barrels of more oil if they wish to, so that the crude market prices can calm down.

The National Security Council’s Middle East Coordinator Brett McGurk, and the State Department’s Energy Envoy Amos Hochstein, both traveled to Saudi Arabia in February to mend the ties with the Kingdom. Later, McGurk met with Sheikh Mohammed in Abu Dhabi in a bid to address UAE’s anger over the U.S. response to the Houthi attacks.

A U.S. official said, “the Biden administration has worked diligently to strengthen Saudi and Emirati missile defenses, and that America would be doing more in the coming months to help the two Gulf nations protect themselves. However, it may not be everything the two countries want, but U.S. is trying hard to address their security concerns”.

Meanwhile, Saudi Arabia and UAE have declined to pump more oil, while sticking to the production plan approved among the members of Organization of the Petroleum Exporting Countries (OPEC). The energy alliance with Russia has enhanced OPEC’s power and also brought the two gulf monarchies closer to Moscow.

Saudi Arabia and UAE started keeping away from United States after Biden publicly reprimanded Saudi Arabia’s legitimate action in aiding Yemen’s sovereignty against Iran-backed Houthi terrorism.

Biden also reversed the move taken by his predecessor Mr. Donald Trump, that put the Houthis on the America’s official list of global terrorists. Due to which, the efforts to broker a cease-fire deal between Yemeni forces and the Houthis were ruined.

UAE ambassador to United States Yousef Al-Otaiba said last week, that the relations between the two countries were strained. He said, “It is like any relationship. It has strong days where the relationship is very healthy and days where the relationship is under question. Today, we’re going through a stress test, but I am confident that we will get out of it and get to a better place”.

On the other hand, when Saudi Crown Prince was asked by The Atlantic magazine whether Biden misunderstood him or not. Prince responded, “Simply, I do not care”.

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.