OPEC's historic output agreement may be teetering on the edge of collapse. It wouldn’t be in the interest of a single cartel member, but then nor was letting that last deal implode in March. Ignoring the risk of another breakdown seems blinkered.
What was meant to be a pretty straightforward meeting of the Organization of Petroleum Exporting Countries broke up spectacularly on Monday. So they pushed back a gathering with their OPEC+ allies from Tuesday to Thursday in order to allow themselves more time to try to reach agreement internally first.
It’s hard to believe things are so tense given there appeared to be little argument over the need to delay a planned tapering of the output cuts while economies are still roiled by the coronavirus. Adding 1.9 million barrels a day of supply to the market from the start of January would be a reckless gamble given the recovery in oil demand remains patchy. Bloated stockpiles of crude and refined products need to be drawn down before pumping more oil.
The disagreement is more fundamental to the group’s inner workings. It appears to hinge on conditions demanded by the United Arab Emirates that OPEC’s de facto leader, Saudi Arabia, finds unacceptable: That all the countries that have failed to comply with their targets so far continue to make up for it next year.
It’s no secret that the UAE is unhappy with its own output quota, which it regards as tougher than those imposed on fellow members, and that it’s eager to utilize more of its newly-installed production capacity before oil demand starts to wane again.
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